The state’s new workers’ compensation law going into effect Jan. 1 contains a loophole that could leave corporate executives statewide uninsured, some insurers and business leaders warn.
The new law requires all companies to have workers’ compensation insurance, scrapping the current numerical exemption, which permits companies with fewer than four employees to operate without it. Under the present law, corporate officers are covered under their company policy unless they specifically opt out of it.
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But the new law creates an exemption for four executives. Though every company will have to have insurance, the company president, one vice president, the treasurer and the company corporate secretary are exempted unless they specifically elect to be covered. When a company files its incorporation papers with state Secretary of State’s office each year, it must declare who its officers are and, starting Jan. 1, whether they will be subject to the new state workers compensation law.
Executives who want to be sure they are covered can also file a form DWC-11-C with the state Department of Labor and Training stating that they elect to become subject to its provisions. A $5 filing fee is attached to the form.
But some say the law is unclear as to whether those who do not file the form, or file their incorporation forms incorrectly, will be covered. And they warn that if the courts rule that nothing in the new law grandfathers executives into coverage, many of them would have to pay any medical bills stemming from work-related injuries themselves.
“There’s a potentially major group of people out there that could be uninsured,” said Bill Preston, president of The Preston Agency Inc. in Warwick. “The problem is you could have some corporate officer severely hurt, and the court says, ‘No coverage.'”
The exemption was added to allow small companies who have never wanted to be insured to operate without it, noted Laurie White of the Greater Providence Chamber of Commerce. But she also said the chamber has run a series of articles on the new law in its newsletter that point out that the exemption exists.
Matt Carey, assistant director of the state Department of Labor and Training, said the department conducted 10 seminars on the law between October and November. June Alves, an investigator for the compliance and enforcement division of the department’s workers’ compensation unit, said executives should be sure to consult their insurers.
“Our position is that if they are on a policy they will continue to be on the policy through the end of the policy period, and if they are not sure of that they should contact their insurance carrier to be sure that’s the way they’re seeing it,” Alves said.
Still, insurers are concerned that executives will neglect to take care of the issue.
“On a system-wide basis I don’t anticipate that many (claims) will fall in this precise category,” said Douglas T. Brown, past president of Independent Insurance Agents of Rhode Island and president of Keough Kirby Associates Inc., an insurance agency with offices in Woonsocket, Providence, and Franklin, Mass.
“But try to explain that to a guy on a hospital bed who has no idea where his medical payments are coming from.” Brown noted that insurance premiums are estimated until the end of the policy period, when they are actually calculated. That means a company president whose policy runs from October 1998 to October 1999 could potentially be left uninsured for nine months.
At the end of the term an auditor would subtract the executive’s salary for those months from the calculation of the insurance premium. Therefore, companies do have an opportunity to save money. The question is whether they will be doing so knowingly.
The workers’ compensation committee of the independent insurers’ association is now lobbying state legislators to change the law to make it clear that executives covered under their current policies will continue to be covered. But they note that that could take months. And if it takes too long the court could be forced to rule, they said.
“It is a concern for me,” said Bill Allen, vice president of Troy, Pires, and Allen Insurance in Pawtucket. “Until we see something definitive we basically have to keep our ear to the ground to try find out as of (Jan. 1) how we should be advising our clients.”
