Officer Exemptions and Workers Compensation Coverage
By: Bill Wilson
As usual, the answer to questions like this, without access to the policy forms and/or state laws in question, is invariably “maybe.” Often, as a cost-savings measure, officers and owners will forego workers’ compensation and rely on what they believe to be superior medical and disability programs. Whether this is prudent depends on a number of factors. For example, does the medical program have an employment-related exclusion? How restrictive is it? Case law on this issue includes Crawford v. Prudential Ins. Co. of America (Kansas Court of Appeals, 1989), MacArthur v. Massachusetts Hosp. Serv. (Massachusetts Court of Appeals, 1962) and Nallan v. Union Labor Life Ins. Co. (New York Court of Appeals, 1977).
In addition, the NCCI WC 00 03 08—partners, officers and others exclusion endorsement says, “You will reimburse us for any payment we must make because of bodily injury to such persons.”After catastrophic injury where it becomes clear that the programs they relied on are inferior to workers compensation, you may have officers claiming they mistakenly exempted themselves or that it was done so fraudulently. If the insurer is required to provide coverage, the employer could find itself bankrupt if it has to reimburse the insurer.
To read about other considerations, click here.
Chinese Drywall
At least four class action lawsuits against manufacturers, distributors and contractors of Chinese drywall have been filed. The primary Chinese manufacturer reportedly has no insurance. Claims are being filed with homeowners and commercial property insurers on a first-party basis by home and building owners and by building materials suppliers and contractors on a third-party basis under CGL policies.
Direct property damage includes corrosion of copper plumbing piping, natural gas fittings, air conditioning coils, electrical wiring, outlets, appliances and electronic equipment by gasses emitted by drywall. Indirect damages include the cost of living elsewhere during renovation for the removal of the drywall and the diminished value (loss of market value) if the building is sold.
In addition, there have been some allegations of bodily injuries or physiological symptoms such as nausea, headaches, nose bleeds, watery eyes, sinus infections and exacerbation of respiratory conditions, such as asthma and sleep apnea.
To learn why there is likely little coverage in standard personal and commercial lines policies for this issue, click here.
Leasing a Company Car to Yourself
Your insured owns a company that has no auto coverage. For tax (or other) reasons, the company buys a car then leases it to the business owner, your insured. He wants to cover the car on his PAP and include his business as an additional insured using the PP 03 19—additional insured—lessor endorsement, thus saving on his company having to buy a BAP. Is this penny wise or pound foolish?
This approach creates two problems for the business. One lies in the very limited coverage of the endorsement itself and the other lies in the potential tort liability of the business for claims such as negligent entrustment. Both situations arise from the fact that the endorsement provides no coverage for the business’ own negligence.
To read the complete analysis, click here.
Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.
This month’s issue
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