12.2.1.2 Employee's Right to Reject Coverage Prior to Injury

• Jurisdiction: Arizona

. Prior to an occupational accident or disease resulting in injury or death, an Arizona employee has the option to reject coverage and retain the right to sue the employer at common law.^[8] If the employee chooses to reject coverage and later suffers an injury that is caused by the negligence of the employer or a co-employee, recovery through a common-law suit is not limited to damages under the Workers’ Compensation Act but is determined by general principles of tort law regarding liability and damages.

The right to reject coverage remains obscure to the vast majority of employees. It is most frequently used by partners or officers of small businesses who prefer to obtain more extensive or more cost-effective coverage through private medical and disability insurance with deductibles and waiting periods.

Arizona employers are required to keep posted a notice indicating that election is available.^[9] Such notice must follow a statutory form, be placed in a conspicuous place on their premises, and must be in both English and Spanish. Blank rejection forms must be available at the place of hire for employees who wish to reject coverage.^[10] An employee’s rejection notice must be substantially according to the statutory form, signed and dated by the employee, and given to the employer in duplicate.^[11] Within five days the employer must file the rejection notice with its insurance carrier, where it should be maintained as a business record.^[12]

In considering a worker’s claim to have rejected compensation coverage, courts expressly construe the statutes and the facts in favor of finding coverage. In the absence of strict compliance with statutory formalities governing rejection of coverage, the employee is conclusively presumed to have elected coverage.^[13] This is true even where the actual insurance policy specifically excludes coverage of the particular employee or corporate officer.^[14]

A previous election to reject workers’ compensation coverage is not binding upon the employee in a new employment with a different employer or following re-employment with the same employer. Nor is it considered valid if it has been coerced by the employer or is anything less than free and voluntary.^[15] It is, however, binding where the employer merely changes insurance carriers or the legal form in which it is doing business.^[16]

The option to reject workers’ compensation coverage lies solely with the employee. Any election by the worker is also binding on the worker’s...