What happens if an employee who works for an employer based in one state is injured on the job while working in another state? How does workers compensation coverage apply?
These questions come up quite frequently and can be very confusing to employers, insurance agents and insurance company personnel. Unfortunately this post is not the place to get into the finer points of extraterritorial and reciprocity issues that may apply to workers compensation and coverage issues. However I’m going to hit some of the more important points.
To begin you must remember, workers compensation insurance coverage is state specific. Each individual state has their own statutes and rules that govern how workers compensation applies within their state. So let’s talk about how coverage is provided in other jurisdictions.
It’s important that a workers comp policy be set up properly in order to provide coverage in other jurisdictions. Item 3A and 3C, found on the policy declaration page, dictate coverage application.
Item 3A – states: “Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: xx xx xx” – and is a list of states where the employer conducts business operations and/or expects to operate at the beginning of the policy. Determining which benefits apply to an injured employee you may find the employee actually has a choice in which state to file their claim. So it’s important to have the 3A states correct. For example if an employer has an employee residing or performing work in another state, at the beginning of the policy period, not listed in 3A, then there will be no coverage for that state unless proper notification is given to the insurance carrier. Proper notification must usually be made within 30 days of work being started.
Item 3C – states: “Other States Insured: Part Three of the policy applies to the states, if any, listed here: xx, xx, xx” – and is a list of states where the employer may eventually have employees working but where the work may not have begun or will begin after the start of the policy period. The insured employer must notify the insurance carrier immediately if work begins in any state listed in 3C. Typically all remaining states should be listed in 3C. You may find an insurance carrier will exclude from this list the monopolistic states (coverage in monopolistic states must be secured through that individual state); may be unwilling to list all other states for specific reasons that apply to that specific carrier; may not be licensed in all states to provide coverage; and in the case of certain State Funds may not be able to provide 3C coverage at all.
Extraterritorial coverage is guided by state statute and is an extension of any individual specific state workers compensation law that governs benefits and how they apply when an employee hired in the primary state is injured while working in another state. You’ll find there are many state specific limitations, most in the form of some type of maximum time limit which the employee can spend working outside the primary state and still be able to make a claim under the primary states workers compensation statutes. Some jurisdictions will allow up to 6 months while others may not address the time limit situation at all. But you must check each individual state and confirm their rules.
Reciprocity provides guidance and determination of benefits when an employee, primary in another state, is injured on the job. Not all states reciprocate other states extraterritorial provisions. You must be careful with this and actually verify reciprocal agreements as they will drastically vary from one state to another. As found with extraterritorial issues, reciprocity applies to an employee working temporarily in another state. And likewise you will find specific time limitations to the application of reciprocity. Once an employee is working in the other state and temporary status expires, then primary coverage for the other state must be secured. Specific rules governing the application of reciprocity are found within statute and must be checked.
Compliance is the final part of the extraterritorial and reciprocity issue. Once temporary status, regardless of the individual states definition and application, has expired primary coverage would need to be secured within that other state. If that is not done then the employer may be considered non-compliant and subject to penalties for not securing proper coverage.
Remember, payment of benefits and jurisdiction of coverage are not guided by the workers compensation policy but by state statute, in some cases state industrial board commission rulings and the courts. So look to the statutes for guidance, not in a workers compensation policy.
Be sure to visit our state rule pages for more specific information on individual state extraterritorial and reciprocity issues.
Hope this helps you out! Thanks!
