04 Mar E&O Exposure for Workers Injured in Other States
Securing workers’ compensation coverage in all states where employers have workers and payroll is critical. Failure to do so can create uninsured claims and the potential for a large E&O loss.
When discussing WC coverage, it is important to ask, “Where do you currently have work, or where do you anticipate having work in the next 12 months?” These states should be listed in item 3.A. of the policy’s information page. Typically, a worker injured in a state other than the state of residence would look to the coverage of their home state. Listing a state in 3.A. also provides coverage for employer’s liability suits in those states.
It is important to look at the “extra-territorial” coverage of the home state. However, there are times when injury occurring in other states can “trigger” coverage in that state. For example, an out-of-state worker injured in Alabama can file a claim there. If Alabama is not listed on the information page, there would be no coverage for Alabama. There is possibly coverage under the home state’s coverage, but Alabama might provide better coverage.
To “hedge our bets,” it’s important to consider listing states where the insured might have jobs but are not currently working in 3.C. Other States Coverage. Suggested wording would be “all other states, other than those listed in 3.A. and monopolistic states.” At the very least, we should list the states surrounding the home state. We should tell the employer to notify us if a job has begun in one of those states so we can move it to 3.A. There would be coverage for work begun in those states during the policy period. The premium for the exposure would be picked up at the audit. However, adding the states when you receive notice can avoid a big audit charge at the end of the policy term.
It should be noted that we can’t add monopolistic states to either 3.A. or 3.C. The monopolistic states are Ohio, Wyoming, Washington, and North Dakota. Securing coverage in those states would require contributing to the state funds.
Here’s a question I recently received from an agent:
“I’ve got a contractor with multiple states on their workers’ compensation policy, but three jobs are coming up in Ohio this year. They put in the small gas station kiosks in front of grocery stores/Walmarts/etc. None of the employees will be from Ohio, and they will NOT be hiring anyone from Ohio. What do they need to do for WC in Ohio? Who do they call?”
An out-of-state worker injured in Ohio would look to the WC coverage of their state. However, Ohio WC comes into play if the employer has workers in Ohio for more than 90 consecutive days. The employer must apply for coverage and contribute to the Ohio State fund to secure a WC participation certificate. Read more here.
Say your employee has three jobs. The first job lasts 20 days, then they go directly to the second job, which lasts 35 days. Finally, they go directly to the third job, which lasts 40 days. The employees have been in Ohio for 95 days, so the Ohio law applies. So, it’s not 90 days at any one job, but 90 consecutive days for all jobs.
If Ohio law applies, the employer should also add the Ohio Stop Gap liability endorsement to their workers’ compensation policy. The Ohio fund does not provide Employer Liability coverage.
Be careful with workers’ compensation coverage, and make sure there is coverage in all states where the insured does, or might, have work. Failing to do so becomes an E&O exposure. Make sure you document all conversations with the insured. Also, the employer should be advised to report immediately if they hire a worker in another state. Several recent E&O claims have occurred due to the failure to report out-of-state workers. Part of your procedures should include this question.