Out of State Insurance Coverage for Workers Compensation

As any employer with locations in more than one state knows, the workers compensation policy is written specifically for the states where the employer has physical facilities.  On the Information Page that comes with each new policy or policy renewal, is Item 3.A (for most insurance carriers) which designates the states where the workers compensation policy is applicable.  Workers compensation coverage does not apply to claims filed in other states.

While the insurance carriers attempt to limit the exposure to claims occurring where they may not have claims offices, or knowledge of the workers compensation statutes, the states take a much broader approach. The workers comp statutes of most states specify when and how the workers comp act applies out of state.  Normally, the state statute will indicate that if the contract to hire was negotiated within the state, the workers comp laws apply regardless where the injury occurs. (WCxKit)
Most state workers comp statutes will have extraterritorial provisions that state if the principal place of employment is within the jurisdictional boundaries, a workers comp injury occurring outside of the state boundaries is still covered by the state law.  The workers comp statutes also normally specify that any work related injury occurring within the borders is subject to the workers compensation statutes, even for employers and employees whose place of business is not within the state line boundaries.
When the employee is injured in another state where the employer does not normally do business, the extraterritorial provisions of the state workers comp act work great, as long as the employee elects to utilize the benefits of the home state workers compensation act.  The problems occur when the employee elects to file the claim in a state where the employer does not have a physical location and the employer does not have workers compensation coverage. 
The usual reason an employee files for benefits in a state other than the home state is the amount of temporary total disability (TTD) benefits that will be paid.  Consider the highly successful salesman from Georgia earning $1,500 per week.  If he is injured in Iowa with its high maximum weekly TTD rate, he will receive $1,000 per week while he is unable to work, if he elects Iowa for workers comp benefits.  If he elects Georgia benefits, the TTD rate is capped at $500 per week.
This creates a coverage issue for the employer.  When the workers comp policy is purchased, the employer should have the insurance agent or broker specify in Item 3.C of the Information Page the other states for which coverage is requested.  Some agents will approach this by listing every state and territory except North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the US Virgin Islands (the four monopolistic states and two monopolistic territories where the state/territorial governments provide the workers comp coverage). This can result in an accidental oversight where the agent leaves out a state. 
A better approach is to insert the following on the Information Page in Item 3.C: “All states and US territories except North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the U.S. Virgin Islands and those states listed in Item 3.A of the Information Page.” While this is the best approach to out of state coverage, some insurers, especially single state insurers or small regional insurers, will object to providing workers comp coverage in other states where they are not licensed to do business.
Most employers think of the workers compensation policy and the workers compensation coverage as one and the same.  Actually, the workers comp policy is divided into several sections with Part 1 being the actual workers comp coverage.  Part 2 is employer’s liability insurance which covers injuries to employees when workers comp coverage does not apply. Part 3 is Other States Insurance.  With this coverage, workers compensation and employers liability insurance is provided for incidental exposure in states not listed in Item 3.A of the Information Page.
It should be noted that Other States Insurance covers only incidental exposures.  When the employer starts to have employees in a state on a regular basis, the states needs to be included in those listed in Item 3.A of the Information Page. If your business has employees who occasionally travel out of state, it is a good idea to routinely review your coverage with your insurance agent to confirm that your policy provides for incidental out of state exposures.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.
WORK COMP CALCULATOR:  www.LowerWC.com/calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

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