As states passed workers’ compensation laws in the early 1900’s, eligibility, benefits, and compensability varied within each state’s unique workers’ compensation system. Laws vary between states, and, therefore, one must be mindful of the impact such variation has on coverage determination in those situations where employees cross state lines. In this article, we explore some of the key considerations relating to out-of-state workers’ compensation coverage.
Key considerations are state extraterritorial provisions and reciprocity:
Extraterritorial – Each state law addresses whether the benefits provided in the home state extend to injuries sustained in another state. Typically, if the home state has a reciprocal agreement with another state, then the claimant will receive the same benefits it would have received had the injury occurred in the home state. If there is no reciprocity, then coverage needs to be secured for the employee during his/her out of state assignment.
Reciprocity – Reciprocity agreements between states vary and is summarized as follows:
No reciprocity – Employees who work in these states must be covered per the receiving state’s own workers’ compensation laws. For example, Wisconsin requires the employers to secure coverage immediately for three or more employees who work out-of-state on a temporary basis (less than 90 days).
Full reciprocity – States that share full reciprocity agreements fully recognize the other jurisdiction’s laws without limitation.
Limited reciprocity – These states reciprocate, but not in full. Common reasons for non-reciprocity are business class (construction is the most common class excluded), employee count, and length of time in the state.
Injured employees can generally select the greater workers’ compensation benefits of:
Their state of residence
The state in which they primarily work
The state where the injury occurred
The state where their employer’s workers’ compensation benefits are provided
Getting the right coverage on a workers’ compensation insurance policy can be a bit tricky and it is important that an employer arrange coverage in all states where they have exposure to avoid potential gaps or a complete loss of protection. The NCCI Workers Compensation policy offers two options to manage this exposure: Protection and benefits extend to states listed as either primary coverage states (also known as “3.A.” states) or as “Other States” (also known as “3.C.” states).
Primary/3.A. – In addition to covering the states of current operations, this coverage can be used in those states where employees regularly travel to, travel through, live in, or are working in for an extended time (the laws of suspect states should each be reviewed for jurisdictional requirements).
Other States/3.C. – This coverage provides benefits mandated by the state of injury to an employee injured while traveling from a state identified in 3.A., but only if 1) the insured does not have on-going operations in the state of injury, and 2) does not plan to have on-going operations in that state.
Your workers’ compensation insurance policy should also be reviewed for exposure reporting requirements, such as visits to other states lasting longer than 30 days or the commencement of operations in new states. At a minimum, Other States/3.C. status should be extended to:
Bordering states – Eliminates potential exposure associated with an employee who lives in one state but works in the primary state
Any state where income taxes would be paid; and
States where employees may travel short term
In summary, if you have employees that work, live, or travel through other states, it is recommended that you take time to learn how jurisdiction is determined and what problems can arise when more than one state is involved. When it comes to workers’ compensation benefits, states vary widely and it’s a good idea to routinely review coverage to confirm your policy responds as intended.
The Underwriting Consultant Group provides in-house technical underwriting support for Old Republic Risk Management. The group is responsible for setting and communicating underwriting guidelines for the company, working closely with the Product Development and Compliance Department. The Underwriting Consulting Group is based out of the corporate offices in Brookfield, Wisconsin.