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Cutting Costly Corners on Workers Compensation
Many businesses today are looking for ways to cut expenses to boost the bottom line. One idea that may be considered is excluding executive officers and partners from the firm's workers' compensation coverage. Keep in mind that the Texas Workers' Compensation Act requires coverage for an executive officer or partner, unless the officer or partner is excluded from coverage by endorsement. In each case, the carrier is required to get the endorsement excluding coverage signed by an authorized representative of the company.

Before making this decision you should ask yourself if the premium savings is really worth the risk you assume. Typically, the annual premium to cover executives of the company for work related injuries is pennies on the dollar. The Texas base rate for Executive Officers is $0.47 per $100 of payroll which is subject to an annual maximum of $62,400. ($62,400/100 X .47= $293)

If the excluded individual is seriously injured on the job, where will the money come from to pay the medical bills? Most individual and group health insurance plans do not cover medical expenses incurred as a result of work-related injuries. For example, many group policies contain wording similar to the following exclusion: "The benefits...are not available for...any services or supplies provided in connection with an occupational sickness or an injury sustained in the scope of and in the course of any employment whether or not benefits are, or could upon proper claim be, provided under the Workers' Compensation law." Even if coverage for occupational injuries could be arranged for on individual or group plans, they would still be subject to limits, exclusions and deductibles that are standard for these types of policies. The medical benefits provided under the workers' compensation law have no limits, exclusions or deductibles.

Also, a workers' compensation policy provides disability benefits that the individual may not have through their health care plan. These benefits could also be utilized to cover extensive rehabilitation costs associated with a serious injury that occurred in the scope of the persons employment.

Another issue that may arise when a corporation decides to exclude executive officers with little or no ownership interest, or partners with a minority ownership interest, is becoming involved in legal actions. After a catastrophic injury to one of these individuals, he or she could claim that they were unaware of the workers' compensation coverage exclusion and didn't have an opportunity to find alternative coverage. They could bring suit against their employer and/or senior executive(s) who were involved in making the decision to exclude coverage. The company may or may not have alternate coverage for lawsuits of this nature.

The exposures to risk created when executive officers/partners are excluded from workers' compensation coverage greatly outweigh the minimal cost to protect them.
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