Workers’ Comp Insurance in Kentucky

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Why You Need Workers’ Comp in Kentucky

Workers’ Compensation laws protect employees that get sick, injured, in the course of employment. The law provides financial relief for families of workers that suffer fatalities. It is a no-fault system and the medical care, and disability payments begin immediately. These laws protect employers because workers cannot sue them for losses due to work-related injury or illness.

Kentucky law requires employers to offer workers’ comp coverage to each full-time or part-time employee unless exempt. Kentucky law also permits employees to opt-out of the Workers’ comp system. The farm worker exemptions are important in states with significant agricultural industries as in Michigan, Illinois, Ohio, and Kentucky.

Employers that fail or refuse to comply can face stiff penalties and jail time. The below-listed items describe civil and criminal penalties for noncompliance.

    Civil Penalties

  • The state can impose civil penalties on uninsured employers.
  • Fines of $100 to $1000 per employee per day
  • Stop work order until full compliance

    • Criminal Penalties

  • Criminal penalties include fines, incarceration, or both.
  • Fines of $100 to $1,000 for each violation

Buying Workers’ Compensation in Kentucky

Kentucky has a strong market for insurance consisting of insurance providers, self-insured groups, and KEWMI for assigned coverage.

Instructions for Buying

You should first go to the open market and get quotes. This is the best way to get low prices and the best coverage. Many companies use agents and brokers to work the market using their expertise. If you can show more than $10 million in assets, then you can apply for self-insurance certification. Those that did not find coverage on the open market can use KEMI. This Commonwealth-sponsored private company will provide coverage and if needed can assign coverage.

What You Should Know About Workers’ Comp in Kentucky

Workers’ Compensation had a difficult start in Kentucky as the first law was declared unconstitutional under the state constitution because it blocked the right to sue for damages. The law was later approved by the courts, but it had a provision permitting every covered person the choice of opting out of the law. The elect-out provision remains to this day. Any person that would be covered can elect not to have coverage and keep their rights to sue.

Is Your Business Required to Carry Workers Comp Insurance?

Nearly every business in Kentucky must have workers’ compensation insurance. The primary exempted category is farming and strict agriculture activity. Independent contractors are not covered as employees, and federal employees have a separate system as do railroad workers and personnel under the Jones Act.

Employee Exemptions

The Kentucky Workman Compensation laws exempt the below-listed categories of employees.

  • farm workers
  • workers employed as domestic servants in a home with less than two full-time

employees

  • workers employed by homeowners for residential maintenance and repair for up to twenty (20) consecutive workdays.
  • Members of specific religious sects

Business Owners and Shareholders

The law permits some categories of business owners to decide whether they will stay in or out of the Workers’ comp system, they include the below-described types of owners.

  • Individual business owners, true partners and members of LLC’s, are

    • not required to obtain coverage for themselves but may elect coverage.

  • The law deems Corporate officer-owners to be an employee of the corporation

    • and therefore, must be covered.

Where to Buy Insurance?

You can buy workers comp coverage on the open market from private insurance companies. You can self-insure with the approval of the Department of Insurance. If you can do neither of these, then you can get coverage in the assigned risk pool.

  • Self-insurance requires a threshold of $10 million in net value. You must submit three years of audited financial statements. Once approved for these standards, you must submit your three-year claims history. The Department of insurance will use the claims history to set the security deposit and excel liability insurance amounts.

  • Self-insurance Group

    Kentucky permits employers that qualify for self-insurance approvals to join together and pool their liability. Each member is responsible for any shortfall in the group liability.

  • KEMI (Assigned Risk Pool)

    The Kentucky assigned risk provider is Kentucky Employers’ Mutual Insurance (KEMI). KEMI has the highest volume of worker compensation policies; they cover 23,000 policyholders. Kentucky enjoys a strong assigned pool system and a robust private market. With a strong carrier like Traveler’s, the assigned pool is part of a vigorous market that has enough competition to moderate prices

How Much Does Workers’ Comp Insurance Cost?

Workers Comp insurance rates in Michigan ($1.00 per $100 payroll) and Kentucky ( $1.16 per $100 payroll) were similar because of the wide range of occupations in each state. They range from basic industries to advanced information technology.

What Is the Cost of Not Getting Workers’ Comp Insurance?

You can get fines, civil penalties, and criminal charges that carry incarceration. You can get fines up to $1,000 per employee per day. The state can shutter a business that does not comply, and it can cancel self-insurance privileges.

List of Places You Can Get Workers’ Comp or More Info

Factors that Impact Coverage

Legal

The Form 4 waiver permits any covered employee to choose not to have Workers’ comp coverage. This rule has strict enforcement and employers cannot use it as a condition of employment, it must be completely voluntary

Liability

Employees can opt out of coverage, but employers cannot use the hire as an incentive or a factor in any way to encourage the election. Once an employee opts out or workers’ comp, he or she can sue for damages if an injury or illness occurs.

Rates

The Kentucky Department of Workers’ Claims sets rates by occupation code. Insurance companies may be able to raise them depending on the Mod or offer policy discounts and premium credits up to 25 percent on an employer’s policy.

Other Helpful Tips

Prime contractors and general contractors that engage subcontractors must check to make sure that the employees have coverage or have opted out of coverage. If subcontractor employees are not covered, then the Commonwealth can impose penalties and shutter the business.

Conclusion

Kentucky is the rare state that allows everyone to get an exemption from Workman’s comp coverage. The state has a robust market for Workers’ comp insurance with KEMI teamed with a major national carrier. The private market is competitive, and those that choose to self-insure do so to save and to exercise greater control.

Sources:

  • An Overview of Kentucky Workers Compensation laws
    http://labor.ky.gov/workersclaims/Presentations/An%20Overview%20of%20Kentucky%20Workers%20Compensation%20Law.pdf

  • Guidebook to workers‘ compensation
    http://www.labor.ky.gov/workersclaims/claims/Documents/Workers%20Compensation%20Guidebook%20(2016)%20changes.pdf