Executive officers, partners and sole proprietors (from here on referred to collectively as “executives”) may elect to exclude themselves from benefits under workers compensation. Accomplishing this varies by state and can be as simple as stating such on the application for coverage, or it can be as complex as having to regularly file a signed affidavit with your state labor board.
The reasons executives decide to exclude themselves from coverage varies. Some are not active in the day-to-day operations of the business, others may perform work-related duties which fall into a classification with a high rate, such as charter pilot, helicopter pilot, or mechanic. Executives may opt out because they carry health insurance for themselves and wish to save workers compensation premium dollars.
However, because of significant changes in the health insurance marketplace in recent years, health policies may now contain exclusions which would preclude coverage for an executive who has decided to opt out of workers compensation coverage.
Some examples of exclusions now found in health insurance policies are:
- “If coverage under workers’ compensation or similar legislation is optional for you because you could elect it, or could have it elected for you, benefits will not be paid for any injury, sickness or mental illness that would have been covered under workers’ compensation or similar legislation had that coverage been elected.”
- “Services for which coverage is available under workers’ compensation, no-fault automobile coverage or similar legislation if you could elect it, or could have it elected for you.”
- “What is not covered: For or in connection with an injury or sickness arising out of, or in the course of, any employment for wage or profit.”
The first two examples speak to coverage which could have been elected but was not. The final example is very clear in its intent – employment-related injuries are not covered.
What are the options?
First, if you have chosen to exclude yourself under workers compensation coverage, check your health insurance policy or call your benefits provider to see if any of the above exclusions (or something similar) are contained in your policy. If an exclusion exists, likely the easiest way to remedy the situation it to un-exclude yourself under workers compensation. The method to do this will vary by state, so contact your broker and they can guide you through the process.
For executives who opt ‘in’ to workers compensation, the salary that will go into rating the coverage will be subject to a minimum and a maximum – these also vary by state. An executive, partner or sole proprietor who takes little or no salary from the business will be subject to the minimum payroll for rating purposes, and on the flip side, a well-compensated executive will be subject to the maximum.
Unique to aviation businesses is that most states will allow an executive officer who is a pilot and flies non-commercially on behalf of the company to split his or her salary between flying duties and “other” (which are usually administrative in nature). Most states allow such executives’ salaries to go into the “flight” classification for those weeks when they fly, and into the other (normally lower-rated) classification for all other weeks. If this is an option for you, keep your logbook up-to-date because an auditor may ask to see it when the policy is audited.
If your health insurance policy contains a work-related exclusion and you continue to opt out of workers compensation, resist the temptation to tell your health insurer the injury was NOT work related. In most states, this would constitute insurance fraud and is simply not worth the risk.
If you are an executive, partner or sole proprietor who has been excluded from workers compensation coverage, we urge you to contact your health insurance provider right away to see if any of the exclusions outlined above are contained in your policy. If so, contact your broker or service representative right away to discuss a resolution to this gap in coverage.
A benefit to being part of AssuredPartners is our access to specialists in different lines of business outside of aviation, including workers compensation. These specialists share expertise, insight and ideas for true power through partnership. To learn more and make sure you are adequately protected, contact our AssuredPartners Aerospace team.