Maybe. What you didn’t like my answer? Ok, here’s more details…but first I need to lay some ground work…
You’ll find that corporate officers are considered employees of a corporation. Makes sense. I know, right? But you may be surprised at how many folks get confused about corporate officers and owners. So let’s throw into the mix the question of ownership. A corporation is a separate entity owned by it’s stockholders. And a stockholder may or maynot be a corporate officer. Get it?
Most states have very specific workers compensation rules regarding the treatment of executive or corporate officers of a company. These rules typically deal with the inclusion or the exclusion from workers compensation coverage. Think about the owner of a small corporation who has a workers comp policy in place that protects his employees but really does not want to include themselves. You might ask why wouldn’t they want to be included? It can be costly if the corporate officer/owner is included in coverage and when there’s more than one company involved that cost will just be multiplied.
Most states will require that corporate officers be included. There are exceptions and special circumstances that may apply. So what happens when a business owner (stockholder) has more than one corporation and they are an executive officer in each?
An example:
- Two distinct separate corporate entities.
- Common ownership.
- Each corporation has its own workers compensation policy.
- Then common or shared corporate or executive officers are included and rated for under each policy.
For employers located in states where the NCCI basic manual applies there’s a wrinkle in the rules that allow an insurance carrier to apply the corporate/executive officer rule only once when all policies are written with the same carrier.
Let’s look at this example again:
- For NCCI states:
- Two distinct separate corporate entities.
- Common ownership
- Each corporation has its own workers compensation policy written by the same insurance carrier.
- Then common or shared corporate or executive officers are included and rated for under only one policy.
Write both policies with the same insurance company and they are allowed to rate only once for common executive officers.
Is there another way to handle this? Sure. Again, given certain circumstances, you may be able to combine entities under common ownership onto one policy. This means then that common corporate or executive officers are included on the policy only once.
The takeaway:
- If you are an insurance agent working with your client make sure you know if your client has more than one workers compensation policy out there; know if they are executive officers with any other corporations; and know if they have ownership in any other corporations.
- If you are an owner/corporate/executive officer work with your agent to understand how multiple owned entities can effect workers comp policies.
- If you have issues or need assistance with entities, ownership and inclusion or exclusion issues be sure to consult with an independent workers compensation consultant!
Remember, each state is different when it comes to the mechanics of workers compensation! Make sure you check out the rules that apply for your specific state!!
Hope this helps you out! Thanks!
