Relates to evidence of insurance concerning persons who may elect to be excluded from coverage under a workers' compensation policy

Summary of Provisions:

Section 1 of the bill would add new subdivision 9 to § 54 of the WCL to require certificates of insurance to identify by name any corporate officer, partner of a partnership or limited liability partnership, member of a limited liability company or professional services limited liability company or sole proprietor who is not covered under the policy.

Section 2 of the bill would add a new § 3455 of the Insurance Law to require workers' compensation insurers to (1) verify whether coverage exists when presented with a certificate of insurance or other proof of insurance coverage and (2) report to the Workers' Compensation Board ("WCB") the name of any person excluded from coverage under a workers' compensation policy under WCL § 54 (6) and (8).

Section 3 of the bill would provide for an effective date 90 days after the enactment.

Prior Legislative History: A similar but not identical NYSIF departmental proposal was introduced as S. 8375 and passed the Senate in 2008.

Statement in Support: Individuals in business for themselves as a sole proprietor, a partner, an owner of a one or two person corporation, or member of a limited liability company often take out a workers' compensation insurance policy to cover either a small number of employees or potential employees that they might hire in the future, but exclude themselves from coverage as they are permitted to do under WCL § 54 (6) or (8). If the policy covers only possible future employees, the policy carries only a nominal premium, unless and until employees are actually hired.

When individuals in business for themselves work as a subcontractor for another business, they must present a certificate of insurance to that business to show proof of coverage. Since the individual subcontractor providing services often has no employees when he or she is hired, the implication is that the certificate of insurance is evidence of coverage for that individual. The workers' compensation carrier for the business that receives the services from these individuals usually does not charge premiums for individuals covered under another policy to avoid duplicative premiums. Reliance by the

hiring business on a certificate of insurance often leaves its insurer unaware of excluded individuals under a subcontractor's policy who, nonetheless, may be considered the employees of the hiring business for workers' compensation purposes. As a result, the insurer may not charge a sufficient premium to cover the actual risk.

The fact that an individual in business for himself or herself is excluded from elective coverage under his or her own policy does not preclude that individual from filing a workers' compensation claim as an employee of the business for which that individual performed services under a contract. NYSIF and other insurers are often held liable for claims involving individuals that were misclassified as independent contractors by the policyholder but later found to be employees by the WCB when a claim is made.

This legislation would better enable workers' compensation insurers to determine when they need to charge premium to cover individuals that work as subcontractors for the insured business by requiring certificates of insurance to identify by name any sole proprietor, partner, limited liability company member or corporate officer that is excluded from coverage under the subcontractor's own policy. At the same time, when a sole proprietor, partner, limited liability company member or corporate officer is in fact covered under the subcontrdctor's policy, the insurer for the hiring business could rely on the certificate of insurance as evidence of coverage for that individual and refrain from charging premium for that individual.

This legislation would also require workers' compensation insurers to report to the WCB the names of any sole proprietor, partner, limited liability company member, and corporate officer that is excluded from coverage under a policy so that such information can be added to data the WCB already makes available online concerning coverage for employers. Adding information about excluded sole proprietors, partners, limited liability company members, and corporate officers would provide workers' compensation insurers with a convenient means of determining whether these individuals must be covered under a different policy.

Fiscal Implications: None.

Effective Date: This would take effect ninety days after it becomes law.