Workers compensation policies are not all the same! So many times employers and agents alike boil a workers comp policy down into the cost or premium the employer must pay. A simplistic view up front that may wind up costing a great deal in the end. While it may be easy to fall into a false sense of security that all policies are the same the fact is they are not and the details demand attention! Let’s take a look at the Limited Other States Coverage endorsement.
Under the typical workers compensation policy, you’ll find part three, Other States Insurance, of the policy is made up of two sections.
- 1. How This Insurance Applies – Which consists of these four items :
- Other state insurance applies only if one or more states are shown in Item 3C on the information page. (This is a coverage trigger. Without a state shown in 3C, coverage will not apply.)
- If you begin work in one of the states listed in 3C AFTER the inception date of the policy….all provisions of the policy will apply just like that state was listed in item 3A on the information page. (Coverage then will apply in a state listed.)
- The insurance company will reimburse the employer for benefits required by the law of that state if the insurance company is not allowed to pay benefits directly to those entitled to receive them.
- If you have work (are doing work or performing services) on the inception date in any state not listed in item 3A you must notify the insurance company within 30 days or else there will be no coverage.
- 2. A Notice – You must tell the insurance company if you start work in any state listed in 3C on the information page.
Here’s how this works. Part One, Workers Compensation Insurance, of the policy is triggered by item 3A shown on the information page. This is where the states in which the employer is currently performing operations must be listed. That would also include their primary state or the state where they normally conduct business. So if an employer has two separate facilities, one in Missouri and one in Arkansas, then both states must be listed in item 3A. Remember it’s 3A that triggers the workers compensation insurance coverage for the states listed there. Now if that employer has plans to open another facility in the state of Oklahoma but at the inception date of the policy has no operations in Oklahoma then Oklahoma should be listed in item 3C, the Other States Insurance, the safety net. Then what happens is when they begin work in Oklahoma, that state is treated just like it was listed in 3A and employees in that state would have primary coverage for the state of Oklahoma. Of course the employer must notify the insurance company when work begins.
Some insurance carriers, because of their operating restrictions, licensing or other reasons may not be able to provide workers compensation insurance coverage in all states. When this happens you will typically see in item 3C only those states listed where they provide coverage other than the primary states listed in 3A.
A more drastic situation is where an insurance carrier only provides coverage within one state. When this happens be sure and pay attention as to how your workers are covered while in another state.
Some insurance carriers will use a Limited Coverage for Other States endorsement. Be careful with this! It is very restrictive and as an employer, under certain circumstances, you may find an employee claiming benefits from a state where you have no coverage!
The take away? Make sure you know how your workers compensation policy will respond when you have workers in other states.
Hope this helps out!
Thanks!
