Other States Coverage – A Workers Compensation Problem

Do you have an employee working in another state on a temporary or permanent basis? If you answered yes then you need to be aware of how your workers compensation policy will respond to extraterritorial issues.

This topic is about workers compensation coverage, when and how it applies if an employee is injured while performing duties within the scope of their work while in another state. It’s complicated because an injured employee may file a claim in:

  1. Their state of residence;
  2. The state where they were hired;
  3. The state where the work was performed;
  4. The state where the injury occurred;
  5. And there may be others…

State regulatory authorities will make the determination as to what state jurisdiction will apply. Why would an employee want to file a claim in a different state? Because the state where they file their claim may have more liberal benefits under their workers comp laws and the injured employee may receive more in the way of compensation!

An employer has these two elements to consider:

  1. Will the state statute allow the injured employee to file a claim and be compensated;
  2. Will the workers compensation insurance policy provide coverage.

It’s fairly obvious that an employee can file a claim in one of the states as shown above so the bigger question is that of coverage. Will the employers workers comp policy respond to another states benefits? And it’s here that an employer must be careful because the answer will be different depending on the type of policy; voluntary market, self-insured or assigned risk; state fund or special association agreement; and lets not forget the monopolistic states!

Problems develop when Part Three – Other States Insurance –  of the standard workers compensation policy are modified in some way to meet the requirements of the insuring carrier or organization. Voluntary market policies will typically include the standard Other States Insurance Part Three unmodified. It’s this section of the policy that provides automatic temporary coverage for employees for new operations and incidental exposures in other states as listed in Item 3C of the declaration or information page of the policy. This is an important part in order for Other States Insurance to apply, the state MUST be listed in 3C! Not all insurance carriers provide coverage in all states and all carriers will exclude the monopolistic states from 3C. So when you receive your policy be sure to look at 3C!

Other policies may restrict Other States Insurance. Some use the Limited Other States Insurance Endorsement which replaces Part Three of the policy with very restrictive wording. Most of the time Association Funds will write their own coverage agreement wording which may also be very restrictive. In the monopolistic states you can only purchase workers compensation coverage from the state and they operate in a very different manner than voluntary market carriers.

Another item that must be considered is that of each individual states requirements. For example some states will require that an employer with contracting operations secure coverage within their state. Even if it’s just one employee!

I guess the take away here is be careful! Check with your insurance carrier about how they provide coverage for other state exposure. If your policy is written through an assigned risk plan (pool) or any other organization be especially careful! And don’t forget to read Part Three – Other States Insurance and check out Item 3C on your policy!

Hope this helps out!

Thanks!

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