A notebook with workers' compensation on it

The Complexities of Multi-State Workers’ Compensation Exposures

Will Roth
Will Roth
Client Executive, PC

Workers’ compensation may seem like one of the simplest forms of commercial insurance. After all, the insurance policy language is only six pages long and covers you as an employer for the medical costs of your employees who have job-related injuries, as well as pays their lost wages. Unfortunately, workers’ compensation is more complex than that, especially when it comes to working beyond the borders of your state. This is especially common in the construction industry but can be applied to any business.

As COVID-19 has changed the landscape of working outside of offices, reviewing how a workers’ compensation is structured is critical to ensure insurance coverage applies.

For example: Did you know that if your employees engage in out-of-state work or live outside of normal operations, coverage for the injured employee may not apply if the policy is not structured properly?

Often times, an injured employee that hires an attorney will file a claim in a state that provides the best benefits to the injured employee. An employee typically selects jurisdiction on the following items:

  • The state their home office is located.
  • The state where they were injured.
  • The state where the injured employee lives.

Knowing this, I think it’s important to review how a workers’ compensation policy is structured.

A Closer Look at a Workers’ Compensation Policy

Workers’ compensation policies contain key provisions for coverage, which is listed in item 3 of the policy’s declaration page. I’ve copied the language below so you can see it:

3.A. Workers Compensation Insurance

Workers’ compensation provides coverage only in those states that are specifically listed and underwritten in this section as the primary place of injury.

3.C. Other States Insurance

Any state that is not listed under 3.a. but represents another potential place of injury must be listed under this section to be eligible for coverage.  Most policies will provide coverage for all states other than monopolistic states, but some policies will specifically exclude certain states.

Key Points about States and Coverage

Why is listing states properly under each section important, and how does it affect your workers’ compensation coverage?

It can depend on each policy, but typical policies under “3.C Other States Insurance” says, “if you have work on the effective date of this policy in any state not listed in 3.A then coverage will not be provided for that state unless the insurance company is notified within 30 days.”

Failure to list a state in section 3.A or 3.C can potentially result in the denial of coverage.

Now, while I provided how employees typically pick jurisdiction above, I also wanted to provide some additional suggested guidelines for you to consider:

Suggested Guidelines to List States under 3.A.

  • The company’s state of domicile.
  • States in which branch offices or operations are located or performed.
  • States in which employees have significant contact (they live and work in the state).
  • States in which a subcontractor is hired to perform work on behalf of the organization.  An uninsured subcontractor can be deemed an employee in certain states.
  • Any state where the contract of hire is made.

Suggested Guidelines to List States under 3.C. Other States

  • Bordering states: exposure arising from employees who work in the primary state but live or occasionally work outside the state
  • States in which the organization plans to being operations or open a location. If operations begin, then move over to 3A.
  • States in which employees do not have significant contact but will travel through to visit clients or customers.

Please note that multiple state claims are highly fact-driven, and the above is not an all-inclusive solution to the problems you may have managing multiple jurisdictions. That being said, as you consider various insurance providers, look for an insurance partner who understands the exposures of your operations and who will comply with your current operations, or if you grow and expand your business outside of normal operating procedures. Holmes Murphy has a system in place (Understanding ART) to make sure we meet the needs of our clients. Learn more about this process.

If you aren’t sure exactly what to ask or what to look for, that’s what we’re here for. Feel free to reach out and talk with us!

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