Beware the “State” of Your Workers’ Compensation Coverage
Posted in: Commercial Insurance
Your workers’ compensation policy may seem like one of the simplest forms of commercial insurance. After all, it covers you as an employer for the medical costs of your employees who suffer job-related injuries and pays their lost wages, as required by the workers’ compensation statutes in a particular state. In reality, however, workers’ compensation is more complicated than most employers realize — particularly when it comes to work beyond the borders of your state.
Did you know, for instance, that if your employees engage in out-of-state work, your protection against workers’ compensation claims might not apply? Often, the reason for the lack of this coverage stems from a mere oversight: your insurance carrier or broker didn’t ask for enough details.
What do insurance providers need to know about your organization and employees so that you’re fully protected when facing a claim? What should you consider when buying workers’ compensation coverage? Here’s a rundown.
Nuances and complexities
From an insurer’s point of view, even the basic workers’ compensation policy represents a potentially complex set of coverages. The policy may provide a different array of insurance coverages and limits for each state in which your employees could be injured. As a result, workers’ compensation insurers must identify the states to which they are extending this coverage. Failure of an insured and/or their broker to identify states that might reasonably be expected to require workers’ compensation insurance can result in the denial of this coverage for an otherwise legitimate claim.
Workers’ compensation policies contain separate, important grants of insurance, which are listed in Item 3 of the policy’s declarations page:
3.A. Workers’ Compensation Insurance: Workers’ compensation is provided only in those states that are specifically listed and underwritten in this section as the primary place of injury, according to the particular laws of that state.
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.
If you’re seeking workers’ comp coverage, it’s important for you to work with your insurance broker to identify specific states that should be listed in section 3.A. and 3.C. There are no hard and fast rules that define when states should be listed in each section, but some suggested guidelines are discussed below. You have the flexibility to interpret these guidelines as long as you can reasonably justify your selection to the insurance carrier if a claim is filed. However, failure to list a state in either 3.A. or 3.C. can result in the denial of a workers’ comp claim by the insurance company if one of your employees is injured there and brings a claim under the statute in that state.