You have a workers’ compensation policy that covers your employees. So when your employee travels for work, you assume that they are covered should they be injured while “on the job”. Assuming wrong, and you may be opening up your own checkbook. Where the employee goes to, and how long they are there, does have barring on if your employee’s injury is covered.
On Monday, March 12th, 2018, I posted my monthly Legal Corner blog post about recent case rulings that impact employers when it comes to HR & Safety Compliance as well as Workers’ Compensation. After every blog post I usually receive a dozen or so calls or emails from people that were looking for more information on the subject of the post, however, in this post’s case, I have received a hundreds of questions, from employers to insurance agents, stemming from one specific Workers’ Compensation Case Law Ruling in that Legal Corner post.
Here is the case I referenced: Employer discovers lower quote does not mean same coverage when out of state accident is not covered – Indiana
Custom Mechanical Construction (CMC) is an Indiana-based mechanical contractor but is authorized to do business in Kentucky. Since its establishment in 2005, it had used the same insurance agent and the same carrier for workers’ comp. In 2015, the agent solicited bids from other carriers and secured a $3,000 lower quote. The company claims that it was led to believe that the coverage was the same. When a CMC worker was injured on a job in Kentucky, the carrier filed suit in a federal trial court in Indiana seeking a judicial determination that its policy does not cover claims from Kentucky. CMC counterclaimed that the carrier wrongly and unreasonably denied coverage, and that the broker is liable for failing to procure adequate coverage. The judge found that CMC had no viable claim for bad faith nor negligence and that the broker was not an agent of the carrier. Accident Fund Insurance Co. of America v. Custom Mechanical Construction.
So, does a workers’ compensation policy have a coverage territory/travel restriction? The answer is yes/no.
The Employers Liability portion of the policy provides coverage for suits brought in the USA, its territories or possessions, or Canada. Sounds fair, and aligns with your business auto and general liability policy definitions of a coverage territory. If you are doing business only in the USA and Canada, you might think you are OK. If your employee travel outside of the USA and Canada, even for a day, you need to make sure you have Foreign Voluntary Workers’ Compensation Coverage, and should also make sure you have appropriate liability coverages as well.
However, the Workers’ Compensation portion of the policy does not define a territory, so that sounds even better does it not? Not really. It does something that should cause all employers to ask more questions. A Workers’ Compensation policy provides statutory coverage for an employer for the specific state(s) listed in 3. A. on the declaration page of the workers’ compensation policy. So two little, abbreviated letters, in one big, multi-page policy actually defines where you have coverage
If you have physical locations in MD, NY and PA, and MD, NY, and PA are listed in 3.A. of your policy, you think you are all set. But what if your employee travels to NJ, VA, DC, NY or OH?
What if you have a telecommuter that works from home in another state? What if you have a employee that lives in OH but works from your PA location, but then travels back into OH for business purposes? This is where things actually get confusing.
With 50 states, and several territories including PR & DC, explaining all possible variations would cause this to be an extremely long blog post, so I am not about to address every issue. Therefore, I am going to point out the key issues you need to look into to make sure you are properly covered. The best thing to do, is to ask questions.
- Effective Date of the Policy – The workers’ compensation policy defines that you have coverage for the states listed in 3.A. of the declaration page. It also defines that if on the effective date of the policy. If you have employee(s) working in another state not listed in 3.A. on your actual renewal date, or have an ongoing operation in another state, you do not have coverage in that state during the remainder of that policy year. It does have a provision to allow you 30 days from the effective date to inform the insurance company. If you forget, you have an issue.
- With 50 states, and several territories including PR & DC, each state and territory has their own rules. The two key provisions you need to understand are:
- Extraterritoriality – what your state’s workers’ compensation laws allows in terms of coverage when an employee leaves the covered state. A state may provide coverage for an unspecified period of time, or it might allow for a limited number of days such as 30 or 90 days. If you meet the extraterritoriality provisions, your employee may be covered when out of the covered state
- Reciprocity – is whether or not the state’s workers’ compensation laws, of the state that the employee is in when injured, allows allow the your policy to provide coverage for the employee in that state while there. A state’s law may allow another states coverage to ally for an unspecified period of time, or it might allow for a limited number of days such as 30 or 90 days, or not allow any coverage to extend to that state. Therefore, if that state does not allow your coverage to extend to the state, you would need to add that state as a covered state in 3. A.
- For example, due to OH reciprocity with PA, a PA based construction employee can work in OH for up to 90 days in any 12 month period before the employer would need to purchase OH workers’ compensation coverage for that PA employee. (Note: an OH BWC employee has recently told me this is now 30 consecutive days.) However, if that PA employee travels to a NY jobsite, even for a day, the employer would need to purchase NY workers compensation due to the NY reciprocity rules. A similar rule applies to an construction employee going to work in FL.
- All States Endorsement – Many employers believe they have coverage in every state as some insurance agents leave them to believe that since there may be a provision that says something like “all other states…” is listed in Other States Coverage of 3.C. on the declaration page. There is no such thing as a “All States Endorsement”. If you look at it closely, at best, it will state “All other states except 3.A and monopolistic states”. Plus, once again, with 50 states, and several territories including PR & DC, each state and territory has their own rules.
- Other states (“3.C.”) coverage allows the your workers’ compensation policy to comply with the statutory benefits required by the other state where an employee is injured but in which you do not currently have on-going operations, and do not plan to have on-going operations during the policy period. If you did, doing so would require that state to be scheduled as a primary coverage state in 3. A. Employees injured while working in a listed 3.C. state will receive the benefits under that state’s law if made necessary by law or court decision. Basically, the workers’ compensation policy responds and pays benefits in listed 3.C. states just as if the state was scheduled under 3.A.
- Monopolistic States – OH, WY, WA, ND – are states that the only way to provide coverage in that state in section 3 of a policy is by purchasing coverage from that state’s workers’ compensation bureau. No insurance company can provide coverage in those state, however, your states’ extraterritoriality or that monopolistic state’s reciprocity may allow for temporary coverage.
- However, do not assume that if a state is listed in 3.C. that you have coverage as the listed state my not allow that due to reciprocity rules. I point out once again, that NY will require a contractor to have NY in 3.A., and not 3. C. for even 1 day of work.
- Although there might be a small charge on your policy, listing your bordering states, or ones you frequently travel to, might be a good idea.
- Telecommuting employee – if you have an employee that lives and works from home in another state, although you as an employer do not have a physical location in that state, you do have an ongoing operation in that state. Therefore, you need to add that state to your policy and list it in 3.A.
- Employee Residing out of state – you may have an employee that lives in one state, and commutes to your state to work. If they are injured in your state (listed in 3.A.), than your workers’ compensation policy will respond. However, if that employee needs to travel back into their state of residency for business purposes, most likely their state’s laws will supersede your state’s laws, or the employee may chose to file for that states benefits especially if they are higher than in your state. Either way, you may need to have coverage in any state that an employee both resides and works in.
- Subcontractors
- Should you hire a subcontractor that is based out of another state, you need to make sure that they have coverage in your state.
- If you are hiring a subcontractor to work for you at a job in another state, you need to make sure you have coverage in 3.A of that state. If that subcontractor somehow ends up not having workers’ compensation coverage, you as the hiring “general” contractor would be responsible to provide the statutory coverage in that state.
I cannot spell out every variable that you may be thinking of when it comes to your operations and employee travel, the main point of this post is help to create more awareness that you should not assume that your workers’ compensation will cover your traveling employees. You should speak with a Certified WorkComp Advisor, or an experienced agent, and make sure you get your answers in writing.
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