New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on August 17, 2005 representing the position of the New York State Insurance Department.

Re: Accident & Health Insurance, Workers’ Compensation Exclusion.

Question Presented:

May a health insurer, including a Health Maintenance Organization, utilize the exclusion in N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(e)(8) (2002) (Regulation 62) to exclude a work related injury incurred by a business owner?

Conclusion:

Whether, as indicated in the New York Workers’ Compensation Law (McKinney 1994 and 2005 Supplement), such a business owner is covered under workers’ compensation and thus may be excluded from health insurance coverage is a fact specific question.

Facts:

A client of one of the inquirer's members received a letter from its health insurer indicating:

With reference to employees who choose to waive workman’s comp insurance, it is my understanding that the only person who is not required to be covered under the Workman’s comp plan is the owner(s). The [Company’s] contract is very specific that work related injuries are not covered. If the owner was to get hurt at work and had no workmen’s comp insurance, the medical plan would not consider any of the expenses related to the injury. The policy would also exclude any follow-up treatment directly related to the particular injury. This would include any form of therapy or subsequent surgery.

The letter quoted exclusionary language from the health insurance contract:

We don’t pay for care and treatment needed due to sickness or injury for which benefits are provided under State or Federal Workers’ Compensation, employers’ liability or occupational disease law.

The inquirer's member inquired whether the health insurer is correctly construing the allowable exclusion.

Analysis:

N.Y. Comp. Codes . & Regs. tit. 11, § 52.16(c) provides:

No policy shall limit or exclude coverage by type of illness, accident, treatment or medical condition, except as follows: . . . (8) treatment provided in a government hospital; benefits provided under . . . any State or Federal workers' compensation, employers' liability or occupational disease law . . .

New York Workers’ Compensation Law § 3 (McKinney 1994) requires that employers provide workers’ compensation benefits for employees. Employees are defined for workers’ compensation purposes by New York Workers’ Compensation Law § 2(4) (McKinney 1994 and 2005 Supplement):

‘Employee’ means a person engaged in one of the occupations enumerated in section three or who is in the service of an employer whose principal business is that of carrying on or conducting a hazardous employment upon the premises or at the plant, or in the course of his employment away from the plant of his employer; . . . The term "employee" shall not include . . . an executive officer of a corporation who at all times during the period involved owns all of the issued and outstanding stock of the corporation and holds all of the offices . . . or two executive officers of a corporation who at all times during the period involved between them own all of the issued and outstanding stock of such corporation and hold all such offices except as provided in subdivision six of section fifty-four of this provided, however, that where there are two executive officers of a corporation each officer must own at least one share of stock, nor shall it include a self-employed person or a partner of a partnership . . . who is not covered under a compensation insurance contract or a certificate of self-insurance as provided in subdivision eight of section fifty-four of this chapter . . . .

New York Workers’ Compensation Law § 54 (McKinney provides, in pertinent part:

6. a. Insurance of officers of corporations. Every executive officer of a corporation shall be deemed to be included in the compensation insurance contract or covered under a certificate of self-insurance . . . .

b. An executive officer of any corporation who at all times during the period involved owns all of the issued and outstanding stock of the corporation and holds all of the offices . . . and who is the executive officer of a corporation having other persons who are employees required to be covered under this chapter shall be deemed to be included in the compensation insurance contract or covered under a certificate of self-insurance unless the officer elects to be excluded from the coverage of this chapter. Such election shall be made by the corporation filing a notice that the corporation elects to exclude the executive officer of such corporation named in the notice from coverage of this chapter. Such election shall be filed with the insurance carrier or the chair in the case of self-insurance upon a form prescribed by the chair of the workers' compensation board. Such election shall be effective with respect to all policies issued to such corporation by such insurance carrier as long as it shall continuously insure the corporation and shall be final and binding upon the executive officer named in the notice until revoked by the corporation in accordance with paragraph a of this subdivision.

. . .

8. A self-employed person or a partner of a partnership . . . but not including a limited partner, having other persons who are employees required to be covered under this chapter may be included in the compensation insurance contract or covered under a certificate of self-insurance. Such election shall be made by any such partnership or sole proprietorship filing with the insurance carrier or the chairman in the case of self-insurance upon a form prescribed by the chairman of the workers' compensation board, a notice that the partnership or sole proprietorship elects to include the partner or partners or the self-employed person named in the notice in the coverage of this chapter. Such election shall be effective with respect to all policies issued to such partnership or sole proprietorship by such insurance carrier as long as it shall continuously insure the employees of the partnership or sole proprietorship. Such election shall be final and binding upon the partner or self-employed person named in the notice until revoked by the partnership or sole proprietorship. A self-employed person or a partner of a partnership having no other persons who are employees required to be covered under this chapter shall be deemed to be excluded from coverage under this chapter unless he elects to be covered. Such coverage may be effected by obtaining an insurance policy. . . .

Considering New York Workers’ Compensation Law § 2(4) in conjunction with New York Workers’ Compensation Law § 54(6)(b), unless the owner of a close corporation opts to exclude him or herself, that individual is covered for workers’ compensation benefits and thus the exclusion of N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c)(8) would be applicable. If such corporate owner had opted to exclude him or herself, the exclusion of N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c)(8) would not be applicable.

As to individual proprietors and partners, in accordance with New York Workers’ Compensation Law § 54(8), unless the individual has opted to be covered for workers’ compensation benefits, since there is no workers’ compensation coverage, the exclusion of N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c)(8) would not be applicable. If such individual had opted for workers’ compensation coverage, the exclusion of N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16(c)(8) would be applicable.

For further information you may contact Principal Attorney Alan Rachlin at the New York City office.