Senate Bill S7861

                                BILL NUMBER:S7861

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.