Maryland Workers' Compensation: Who Needs Coverage and How to Get It

If you run a business in Maryland with employees, you need to understand workers' compensation. It's not optional, it's not negotiable, and it protects both your workers and your company. This guide walks you through Maryland's workers compensation requirements, who's covered, and exactly how to get the insurance or approval you need.

What Is Workers' Compensation?

Workers' compensation is a form of insurance providing medical benefits and wage replacement to employees injured during employment. In exchange, employees give up their right to sue their employer for negligence. In Maryland, the system is governed by the Labor and Employment Article of the Maryland Code, and it's administered by the Maryland Workers' Compensation Commission.

The commission doesn't sell insurance itself. Instead, it sets the rules, processes claims, and ensures employers comply. Your job is to secure coverage through one of three methods: buy a policy from an authorized insurer, join an approved self-insurance group, or self-insure if you meet the state's financial requirements.

Who Needs Maryland Workers' Compensation Coverage?

Maryland law is clear: any employer with at least one covered employee must secure workers compensation coverage. You cannot legally operate without it.

Covered Employees

Most employees in Maryland are automatically covered the moment they start work. But the definition is broader than you might think.

Corporate officers and LLC members are covered by default. If you're running a corporation or LLC and you have employees on payroll, those individuals are covered as employees. This includes you if you're an officer or member. You don't have to do anything extra to cover them, they're in the system automatically unless they (or you) formally elect out.

LLC members with at least 20 percent ownership can elect exemption. If you own at least 20 percent of the profit interests in an LLC, you have the right to exclude yourself from coverage. But this exemption isn't automatic. You must file written notice with the Maryland Workers' Compensation Commission and notify your insurer. The Commission uses an exclusion form filed through CompHub, its online filing system. The exemption takes effect only after proper notice is given.

Sole proprietors and partners need to opt in. If you're a sole proprietor under Article 9-227 or a partner under Article 9-219, you are not automatically covered. You must actively elect coverage in writing. Many sole proprietors skip this step, leaving themselves unprotected if they're injured at work.

Some state and local agencies also have special rules. For example, certain circuit court clerks, including Carroll County, will not issue or renew a trader's license without proof of a signed workers' compensation certification, even for businesses with no employees. Check with your local clerk about their specific policy.

Maryland Workers Compensation Commission and the Insurance System

The Maryland Workers' Compensation Commission administers the state's workers compensation program, but it doesn't sell insurance policies. Instead, employers must buy coverage from authorized private insurers. The state does have a guaranteed-market option: Chesapeake Employers' Insurance Company, a nonprofit private insurer that provides coverage to employers who cannot obtain it on the regular market. This company converted from the former Injured Workers' Insurance Fund in October 2013 under Chapter 570 of the Acts of 2012. It serves as a safety net, ensuring that no employer is left without an option to insure.

How to Secure Maryland Workers' Compensation Coverage

Maryland law (Labor and Employment Article 9-402) gives employers three ways to meet the requirement:

1. Buy Insurance from an Authorized Insurer

This is the most common option. You contact an insurance broker or insurer licensed in Maryland and purchase a workers compensation policy. Your policy protects your employees and keeps you legally compliant. The cost depends on your industry, payroll, and claims history. Make sure the insurer is authorized to write Maryland policies, unlicensed carriers won't be accepted.

2. Join an Approved Self-Insurance Group

If you're part of a trade association or employer group, you may be able to join a self-insurance pool. These groups collectively bear the cost of workers compensation claims instead of buying individual policies. Your group must be approved by the Maryland Workers' Compensation Commission. This option requires financial stability and commitment to the group's rules.

3. Self-Insure

Large employers with demonstrated financial strength can self-insure directly. This means you pay for claims out of pocket instead of buying insurance. Maryland sets strict financial requirements for self-insurers, you must prove your company can reliably pay all claims. This option is rarely used by small to mid-sized businesses and requires Commission approval.

Special Considerations for Different Business Structures

Corporations

Corporate officers are covered as employees by default. Your workers compensation insurance must cover all officers on the payroll. If you want to exclude an officer, you'll need to modify your policy with the insurer.

Limited Liability Companies (LLCs)

LLC members are covered employees by default under Maryland law (Section 9-206). Any member who actively works in the business should be listed in your workers compensation policy. Members with at least 20 percent ownership can file for an exemption, but this exemption is effective only after written notice reaches the Maryland Workers' Compensation Commission and the insurer through CompHub.

Sole Proprietorships

As a sole proprietor, you are not automatically covered. If you want coverage, you must affirmatively elect it in writing. Many sole proprietors don't realize this and operate uninsured. If you're injured on the job, you won't have benefits to fall back on.

Partnerships

Partners are not automatically covered under Article 9-219. You and your partners must file election forms with the Maryland Workers' Compensation Commission to gain coverage. Without this election, none of you are protected.

Additional Compliance Notes

Depending on your business type, other requirements may also apply. For example, if you hold an MHIC license for home improvement contracting, you'll need to provide proof of liability insurance. Confirm the exact liability insurance amount required with MHIC, as this varies and is subject to change. Your MHIC license application will specify what's needed.

If you renew a trader's license through a local circuit court clerk, be prepared to provide workers' compensation documentation. Some jurisdictions have started requiring proof of coverage or a certification of exemption, even for single-proprietor businesses with no employees. Contact your county clerk's office to confirm their current policy before renewal time.

How Claims Work

When an employee is injured on the job in Maryland, they should report it to you immediately. You then notify your workers compensation insurer, which handles the claim. Medical benefits and lost-wage replacement flow through the insurance policy or self-insurance fund, not directly from your business.

The Maryland Workers' Compensation Commission oversees disputes. If an employee believes a claim was wrongfully denied or if you and the employee disagree on benefits, either party can request a hearing before the Commission. The Commission's role is to ensure the system operates fairly for both workers and employers.

Key Takeaway: Get Coverage Now

If you have employees in Maryland, don't delay. Contact an insurance broker licensed in Maryland or reach out to Chesapeake Employers' Insurance Company for a quote. If you're a sole proprietor or partner who works in the business, file an election for coverage. If you're an LLC member with at least 20 percent of the profit interests and want to exclude yourself, do so intentionally through CompHub, don't assume exemption is automatic.

Maryland workers compensation requirements exist to protect people. They also protect you from lawsuits and legal liability. Operating without proper coverage is illegal and exposes your business to serious penalties.

Disclaimer

This article is informational only and does not constitute legal, tax, or insurance advice. Workers' compensation laws are complex and vary by situation. Before making decisions about coverage, exemptions, or compliance, consult a qualified attorney, CPA, or licensed insurance broker in Maryland. Only they can review your specific circumstances and provide binding guidance. The Maryland Workers' Compensation Commission's website and a licensed professional are your best resources for accurate, personalized advice.

Where to Go for Help

For questions about Maryland workers compensation requirements, start with the Maryland Workers' Compensation Commission's website or call them directly. For insurance quotes and policy placement, contact a licensed insurance broker in your area. For legal guidance on exemptions, coverage structures, or compliance, consult an employment attorney. And if you're starting a business in Maryland, the Maryland Small Business Development Center (SBDC) Network can point you toward local resources and advisors.