By Richard A. Mann, Richard A. Mann P.C.
If you are the owner of a sole proprietorship, a partner in a partnership, or a member or manager of a limited liability company, you are not automatically included as an employee under your current worker's compensation insurance. Under Indiana Code § 22-3-6-1, an owner of a sole proprietorship, a partner in a partnership, or a member or manager of a limited liability company is not an "employee under IC 22-3-2 through IC 22-3-6 until the notice has been received." The notice must be in writing and is not effective until both your insurance carrier and the Indiana Worker’s Compensation Board has received your election. Mailing is not receipt. Best practices would be to serve by certified mail return receipt or some other method allowing for written proof of receipt. While hand delivery may be a viable option with the Board, it is highly unlikely that it would be with the insurance carrier.
The written notice must be "served upon the...insurance carrier and upon the board." Id. The Board is the Indiana Worker's Compensation Board. In addition to serving notice, the owner, partner, member or manager must also be "actually engaged in the" business of the proprietorship, partnership or limited liability company. Id.
If the owner of a sole proprietorship or a partner in a partnership is an independent contractor in the construction trades and does not make the election to be included as an employee, the owner or partner "must obtain a certificate of exemption under IC 22-3-2-14.5." Id. You must file for an exemption. A contractor or employer who assists someone in filing for a false application for exemption could be charged with a Class 6 felony.
It is important to make sure that you are covered as an employee under your worker's compensation insurance as any injury suffered while at work may not be covered by your health insurance and you may not be able to recover your lost earnings. See Dreiling v. Custom Builders, 756 N.E.2d 1087, (Ind. Ct of App. 2001). In that case the owner of the company was injured and because he had not taken the proper steps his injuries and medical expenses were not covered.
Some may think they are not in a dangerous profession so they do not need worker’s compensation coverage. If you are an attorney who slips on the floor while going to see a client, is in an automobile accident driving to a hearing, or struck by a car crossing the street to the court, your health insurance may not cover your medical bills as most major health insurance carriers exclude from coverage injuries sustained while working. In Wright Tree Service v. Hernandez, 907 N.E.2d 183 (Ind. Ct. of App. 2009) (reh'g denied), the court upheld the decision of the board that the heart attack was related to the job. So, if you have a heart attack at the job, your health insurance carrier could claim it was in the course of your employment and, therefore, it is not covered under your health plan.
Another issue if you do not elect to be covered is your lost income may not be covered. Every self-employed person should have disability insurance. But if you do not, at least you can receive compensation, however little, from worker’s compensation. If you have employees and you currently just cover them, you will probably find adding yourself may not increase your costs or if it does it will be minimal.
*This is one of a series on the issues of sole proprietorships, partnerships and other small business and issues with not complying or handling insurance, tax and other issues.*
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