Relates to evidence of insurance concerning persons who may elect to be excluded from coverage under a workers' compensation policy.
TITLE OF BILL: An act to amend the workers' compensation law and the insurance law, in relation to evidence of insurance concerning persons who may elect to be excluded from coverage under a workers' compensation policy
Purpose of the Bill: This bill would enable workers' compensation insurers to identify individuals working as subcontractors for another business who may in fact be employees of that business under the Workers' Compensation Law ("WCL") in order for such insurers to charge appropriate premiums to cover such individuals. This bill would also provide for verification of certificates of insurance by workers' compensation insurers.
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.
STATE OF NEW YORK ________________________________________________________________________ 7861 IN SENATE June 16, 2014 ___________Introduced by Sen. SAVINO -- (at request of the State Insurance Fund) -- read twice and ordered printed, and when printed to be committed to the Committee on Rules AN ACT to amend the workers' compensation law and the insurance law, in relation to evidence of insurance concerning persons who may elect to be excluded from coverage under a workers' compensation policy THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 54 of the workers' compensation law is amended by adding a new subdivision 9 to read as follows: 9. A CERTIFICATE OF INSURANCE OR OTHER PROOF OF INSURANCE FOR ANY POLICY SECURING THE PAYMENT OF COMPENSATION UNDER THIS CHAPTER SHALL IDENTIFY BY NAME ANY EXECUTIVE OFFICER OF A CORPORATION, PARTNER IN 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 BY THE POLICY. S 2. The insurance law is amended by adding a new section 3455 to read as follows: S 3455. VERIFICATION OF WORKERS' COMPENSATION INSURANCE COVERAGE. (A) ANY INSURER, UPON BEING PRESENTED BY THE HOLDER OF A CERTIFICATE OF INSURANCE OR OTHER PROOF OF CURRENT INSURANCE COVERAGE OF AN EMPLOYER FOR THE PAYMENT OF BENEFITS UNDER THE WORKERS' COMPENSATION LAW, SHALL VERIFY TO THE HOLDER WHETHER CURRENT COVERAGE IN FACT EXISTS. THE INSURER SHALL PROVIDE THE VERIFICATION EITHER BY ELECTRONIC ACCESS THROUGH THE INTERNET OR BY E-MAIL OR REGULAR MAIL WITHIN FIVE BUSINESS DAYS FROM THE DATE THAT THE INSURER RECEIVES THE REQUEST. (B) INSURERS SHALL REPORT TO THE WORKERS' COMPENSATION BOARD, IN THE MANNER AS REQUIRED BY THE CHAIR OF THE WORKERS' COMPENSATION BOARD, THE NAME OF ANY EXECUTIVE OFFICER OF A CORPORATION, PARTNER IN 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 BY THE POLICY, FOR THE PURPOSE OF MAKING SUCH INFOR- MATION AVAILABLE THROUGH A SEARCH ON A SECURE WEBSITE MAINTAINED BY THE WORKERS' COMPENSATION BOARD.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13940-01-4 S. 7861 2
(C) THE SUPERINTENDENT MAY ASSESS A PENALTY OF UP TO ONE THOUSAND DOLLARS AGAINST ANY INSURER FOR EACH INSTANCE THAT THE SUPERINTENDENT FINDS THAT THE INSURER DID NOT PROVIDE INFORMATION, UPON REQUEST, CONCERNING COVERAGE AS REQUIRED BY SUBSECTION (A) OR (B) OF THIS SECTION. S 3. This act shall take effect on the ninetieth day after it shall have become a law.