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Workers' Compensation Insurance

Workers' Compensation Insurance is part of the basic insurance program for every business. It's one of those things that the Insurance industry has done such a good job in responding to the requirements of the several state workers' compensation laws that complying to the statutory provisions seems to be simple and straight forward.

Some Basic and General Principals

If an employer is subject to the Workers' Compensation statute, it provides no-fault protection to your employees. If the injury or occupational illness occurs during or arises from work employee is doing for you, you are responsible for paying the employee the benefits established for him or her by the workers' compensation statute, whether or not you have insurance. If you don't have insurance, you will not only have to pay the required benefits, you will have to pay fines and penalties on top of the benefits. If your employee decides to sue you for his or her injury or illness, you may be barred from asserting the common law defenses to that suit, and may face potentially unlimited liability.

Workers' compensation is state specific. While the same insurance policy is used to provide insurance coverage satisfying the requirements of the workers' compensation statute of many different states, the coverage provided by the policy applies only to the states the employer identifies as having locations in which it has employees.

In addition to being state specific, the actual coverage for benefits provided by the workers' compensation policy are statute specific. The actual benefit provisions of the workers' compensation statute are incorporated in the policy. For this reason, the state retains a positive role in the adjustment of claims against the workers' compensation policy. Part of this role lies in the fact that no settlement or closing of a claim is final until it has been approved by the industrial commission or department of labor of the affected state. It is important that an employer recognize also that the responsibility of the administrative body is always to find a reason to provide the injured employee benefits, rather than deny them.

Some Alaska Specific Information

In Alaska, any employer (regardless of the number of employees) is required to provide workers' compensation insurance for its employees. There are a few types of employees that are not subject to the act. If the only employees you have are not subject to the act, then you will not be required to provide them with benefits under the act. These exempted employees include (but are not limited to):

Part Time Baby Sitters
Cleaning Persons
Temporary Part Time or Transient Help
Commercial Fishermen (a separate statute applies)
Contract Entertainers
Contract Professional Athletes or Coaches

In Alaska, a sole proprietor of a business, the partners in a partnership or the Members of a Limited Liability Company (LLC), officers of municipal corporations, charitable corporations, religious corporations, educational corporations and not-for-profit corporations are not normally regarded as employees, but have the option to elect to be covered under the act. All officers (except as listed above) of a corporation are employees and must be provided benefits under the act. However, officers of any corporation may petition the Commissioner of Labor to grant them waivers of participation under the act. If the waiver is granted, they may be excluded from statutory coverage. From the insurance company's perspective, until that waiver is granted and certified to the insurance company, the officer is covered and his or her remuneration will be used in calculating premium.

The premium for workers' compensation insurance is based on the remuneration paid covered employees during the policy term. If sole proprietors or partners are covered as employees, the remuneration applicable to each partner or to the sole proprietor will be $23,400. The remuneration for officers will be based on the actual salary money paid to the officer during the policy term, subject to a minimum of $350 per week and a maximum of $1,400 per week. Policies may be subject to a special rate for coverage for certified acts of terrorism and may also be subject to a surcharge to assist in maintaining the fund solvency of the Alaska Insurance Guarantee Fund.

Revised 10/14/2007