You go where the work is…. But does your coverage?
Potential Workers Compensation coverage gaps when crossing state lines.
One of the most important purchases you can make as an owner of a company is Workers Compensation insurance. This line of coverage serves the purpose of compensating employees for wage replacement and medical benefits, should the worker become injured during the course of employment.
Workers Compensation is also one of the most costly line items a company is required to purchase to ensure their employees and the company is properly covered should a claim arise. A mistake that is made too often is when the employer purchases a policy in one state while having employees working or living in another state. In certain instances this policy that you thought would cover you in all instances, actually may have quite a few coverage gaps should a claim arise.
The primary reason for these potential coverage gaps stems from the fact that the injured employee is entitled to pick which state they file their workers compensation claim is based off of a few different circumstances. The employee can file their claim in the state their work is localized, the state they were injured, or the state where they live. If all three of these circumstances are the same, the injured worker can only file in that particular state. If they are all different however, the worker has the opportunity to pick which state they feel may provide them the best benefits.
For example: Sarah Smith’s job has been localized in Illinois, but she lives in Indiana. At the time she was injured she was on a job for her employer doing work in Missouri. In this case Sarah has the option of filing her claim in any of these three states.
For employers and their carriers this could potentially create a problem. The first steps in making sure your employees have the proper coverage and that you are protecting both yourself and your company from a potential lawsuit, is to verify how your policy reads. Different states and different carriers have differing language that specifies what a policy intends to cover and intends to exclude. Workers Compensation policies can list a number of states on the policy declaration pages where it intends to offer coverage. You should make sure to list the states where you are doing business. It is also smart to make sure that whatever state your worker regularly works or does business in is listed on your policy.
There are many different twists depending on state laws that can throw potential gaps in your policy even if you have multiple states listed. For example if you have an employee as we previously mentioned, that decided to file their claim in a different state due to a more beneficial compensation system than the state that the policy was originally purchased in, you could potentially face a circumstance where the policy can only pay up to the benefits of the state it was purchased in, thus leaving the excess benefits on the employer themselves.
Also, it is very possible that you hire an employee who lives in another state, works only in that state, and gets injured in that state. In this circumstance it is entirely possible that you may need a separate policy strictly for the employees of that state.
Simply trying to list every state on a policy is not always the answer. Depending on the carrier, they can reject adding certain states that they are not licensed in, or do not have the knowledge of the state’s litigation system. On top of that Ohio, Wyoming, Puerto Rico, North Dakota, Washington and the US Virgin Islands are all monopolistic states that do not sell insurance through the private market. You must purchase a separate policy in these areas.
As companies grow and look for opportunities in different areas, it is important to work with a professional with regards to your insurance coverage. Make sure you know how your policy reads and the laws and regulations of the states in which you are doing work. Your agent can assist with informing you on potential coverage gaps and how they can be avoided
J.L. Hubbard Insurance & Bonds