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Sole Proprietors Are Not Always Covered Under Workers Compensation Law

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Sean C. Flaherty       508-822-2000

If you or someone you know owns their own business in Massachusetts, it is important to know  several things regarding Worker’s Compensation coverage. Sole proprietors and partners in a partnership are not automatically covered under worker’s compensation insurance.

A recent Department of Industrial Accidents decision denied coverage to a man who operated a home construction company. As a sole proprietor, he, alone, was the only person working for the business. Because he had a worker’s compensation insurance policy, he assumed he was covered. However, the policy only covered his employees in the event that he decided to hire people in the future. Given the seriousness of his injury, the man is now in an unfortunate situation.

Prior to 2002, a sole proprietor was not eligible as an employee for coverage under worker’s compensation insurance. However, after 2002, sole proprietors could elect to be covered as employees. According to 452 CMR § 8.07, if a sole proprietor wants to be covered as an employee, he or she must submit a written request directly to the carrier. Upon renewal of the policy, the sole proprietor must also “reaffirm in writing their right of inclusion as an employee . . . annually and prior to the renewal date of the policy.” In addition, these written request must be made on company letterhead and signed by the sole proprietor.

Simply put, a sole proprietor must take these affirmative steps in order to be covered under worker’s compensation insurance.

Knowing these requirement is essential to anyone who owns their own business and who simultaneously works for that business. For example, if John Doe owns Doe Vinyl Siding and he is the only person employed in the business, he would be considered the sole proprietor of Doe Vinyl Siding. If John were to get hurt on a job, and he had worker’s compensation insurance, he would still not be covered unless he affirmatively took those steps pursuant to the aforementioned 452 CMR § 8.07. In other words, his insurance would only cover his employees or future employees. The policy would only cover John if he made a signed written request to the insurance carrier on company letterhead prior to the accident.

Therefore, it is critical for business owners to know these requirements regarding coverage. If you or anyone you know is a sole proprietor in Massachusetts, it is imperative that these steps are taken to ensure coverage in the event of an injury.

The attorneys at KECHES LAW GROUP, P.C. are experienced in handling work-related injuries and are qualified to help you with any inquiries regarding insurance and sole proprietorship.  If you or someone you know has been injured on the job, contact KLG for a free consultation.