Worker's Compensation for Partners & Officers

Many businesses today are looking for ways to cut expenses to boost the bottom line. One idea that may come to mind is excluding executive officers or partners from the firm's workers' compensation coverage. 

The Texas workers' compensation law requires coverage for an executive officer or partner, unless the officer or partner is excluded from coverage by attaching an endorsement to the policy. The exclusion can apply to all officers or partners or to one or more specific individuals by name or position.

Is this really a good idea? Here are a couple of things to think about before making this decision.

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, a typical policy contains 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 on an individual or group plan, there are limits, exclusions and deductibles. The medical benefits provided under the workers' compensation law have no limits, exclusions or deductibles.

Another issue may arise when a company decides to exclude executive officers with little or no ownership interest, or partners with a minority ownership interest. After a catastrophic injury to one of these individuals, he or she may claim that they were unaware of the workers' comp exclusion and didn't have an opportunity to find alternative coverage. They may sue the employer and/or the senior executive who made the decision to exclude all officers or partners. That lawsuit probably won't be covered by any policy carried by the company or the senior executive.

Bottom line: It's not a good idea to exclude officers or partners from the company's workers' compensation insurance. These individuals are just as exposed to on-the-job injuries as other employees and there may be no other way to cover the resulting medical expenses.