If a new business is started, under exactly what circumstances is it
not necessary to have Workers' Compensation Insurance coverage for
officers or directors that are actively working in the business.  The
official State of California site is not really specific about this,
just obliquely referring to the Labor Code.  A good answer will have
some sites with specific cases of where this insurance is not
necessary, and some where it is necessary.

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Clarification of Question by latexbuster-ga on 26 Feb 2005 11:03 PST

The business will be a corporation.  All stockholders will be officers
and/or directors.  The business will be in California only.

Dear LatexBuster,

In the State of California, owners and officers of corporations
don't need to be covered. 

Certainly, you may, if you wish. But you are exempt.

I am only providing you with one reference - 
the State of California's Department of Insurance's FAQs page.
Read the 2nd and 3rd questions and answers.
http://www.dir.ca.gov/dwc/faqs.html


As it happens, I know this is current practice and the state does not object.

Best wishes

Your TaxMama-ga

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Clarification of Answer by taxmama-ga on 28 Feb 2005 18:11 PST

P.S. I know you'll have questions about this. Don't worry, I am happy to answer.

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Request for Answer Clarification by latexbuster-ga on 01 Mar 2005 10:31 PST

Thanks for the answer.  The Q and A that you cite is the same  one I
read prior to posting my question, and which I indirectly referenced
in my question.  I hope that your concise answer is correct for all
cases.  However, the state Q and A section is not totally clear as to
whether officers and directors are always exempt from coverage all the
time.  The specific case that I am interested in is as follows:

There will be two shareholders of a corporation, both are to be
officers and directors of the corporation.  There is to be one more
officer, but this particular officer will not own stock.  There are to
be no other shareholders or officers. Will the non-shareholding
officer need to be covered? Your answer indicates that this person
will not need to be covered, but I want specific clarification of this
case, which is really the only one I am concerned with.

 Thank you.

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Clarification of Answer by taxmama-ga on 01 Mar 2005 11:47 PST

You asked:
Will the non-shareholding officer need to be covered? 
Your answer indicates that this person will not need to be covered,
but I want specific clarification of this case, which is really 
the only one I am concerned with.

Dear LatexBuster,

Sorry, I misunderstood your question. 
I thought you meant that all officers were also owners. 

No, the officer who is not a shareholder does have to be covered.
He is simply an employee of the company. 

All employees must be covered except the owners. 

This isn't a gray area. 

Go back to that same FAQs page and that's what the second answer says:

"Generally, all employees of the company, as legally defined,
including corporate officers and directors, must be included in the
policy unless they are the sole owners of the firm, in which case they
may elect not to be covered."

Frankly, these days, worker's compensation insurance isn't that costly. 
They have waived the $600 minimum payment/deposit everyone used to require
to open the account. Now, it costs more like $200 per year, depending on
the compensation. 

And let's face it, if you have someone working for you...you don't want
them suing you personally if anything happens. 

Best place to get coverage for just one person is the State Compensation 
Insurance Fund. They are a quasi government agency. And when they are 
profitable, they give their policyholders dividends that reduce annual
premiums. http://www.scif.com/

Also, check your business liability policy to see if they include workers
compensation coverage as part of your policy. They might.

Let me know if you have any other questions.

Best wishes,

Your TaxMama-ga

Thank you for a very clear answer to my question.