Item 3C, found on the information page of a workers compensation policy, can be looked at as a catch all or safety net. Typically it’s here that you will find states listed where an employer may begin work after the effective or renewal date of a workers compensation policy but not where they have ongoing operations.
A bit archaic and cumbersome at best, the use of Item 3C is the only way you can add coverage to a workers compensation policy for Other States Coverage. That is when, at the policy effective or renewal date, an employer does not have operations in the specific state in question. Let me try that again…for those states in which an employer is actively conducting business operations at the effective or renewal date of the policy they must be listed in Item 3A. (For more information on Item 3A check out this previous post.) It’s the other remaining states, those where the employer may, at sometime in the future conduct business operations, that must be listed in Item 3C. Additionally, if an employer begins operations in a 3C listed state, the standard policy requires the employer to notify the insurance company as soon as work begins.
Let’s put to rest the idea of a “Broad Form All States Endorsement.” Contrary to a popular belief among insurance agents and a lot of company personnel this endorsement no longer exists. Known as the “Broad Form All States Endorsement,” this endorsement was commonly attached to a work comp policy where it easily provided coverage in other states however its use was discontinued many years ago.
It is now common for an insurance company to list in 3C all states in which they are licensed to provide coverage. As a matter of fact special, broad wording for 3C has been developed over the years to use in this section. Sometimes this is automatic, sometimes it requires an underwriter to modify the policy and sometimes insurance carriers, because of underwriting reasons, will only provide a list of states in 3C.
You will not find listed in Item 3C the Monopolistic States. Ohio, Washington, North Dakota and Wyoming are known as the monopolistic states and workers comp coverage in those states can only be provided through their individual states workers compensation programs. So, as coverage cannot be provided in those states by standard insurance carriers, they cannot list those states in 3C.
Common problems found with Item 3C:
- Some insurance carriers are not licensed in all states. When this is the case the insurance carrier can only list those states where they are licensed to conduct business in 3C. But what about the other states? What if an employer begins work in a state not listed in 3C? How is coverage provided in a state where the insurance carrier is not licensed?
- Some insurance carriers are only licensed to conduct business in one state. State Funds are typical of this type of operation. They are only able to provide workers comp coverage for their state and not in other states. Again, how is coverage provided for an employer who begins operations in a state not listed in 3C?
- What if an employer has ongoing operations at the policy inception date in a state listed in 3C and not in 3A? Is there really no coverage provided under the policy?
- What if an employer fails to notify the insurance carrier if they begin work in a 3C state? Will there really be no coverage?
So, while Item 3C should be the catch all or safety net, it’s incorrect use may just create a bigger problem for all involved! Insurance agent, employer, insurance company underwriter and employee all have an interest in making sure all parties understand and correctly apply Item 3C!
Hope this helps out! Thanks!
