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The world is getting smaller and -- now more than ever – business is becoming global. It’s not uncommon for companies to operate in foreign countries. They might hire local citizens in those countries or send their American employees overseas, sometimes for extended periods of time.

For example, a key employee is going to be stationed in China for six months. Unfortunately, a work-related accident occurs and the employee is seriously injured. Is the employee covered?

Most domestic workers' compensation insurers extend coverage to covered employees for “temporary” travel outside of the United States. If an employee is injured in a foreign country and coverage applies, the employee would receive “state of hire” benefits. The problem is that “temporary” is not defined, nor has there been any case law to help clarify just how long "temporary" lasts.

In a recent survey of insurance companies by Cavignac & Associates, the ambiguity of this topic became clear. The following comment is reflective of how most insurers viewed this exposure:

“I believe that if a person retains his or her California residence and travels abroad up to three or four months, then the California policy would still extend coverage, but once again, that is my opinion. There could be unique circumstances and evidence that overrides the extension of coverage. Because of the ambiguity, our company does not have a set defined period of time. This remains a decidedly gray area and because of that, it makes sense for employers with known foreign travelers to clearly understand their employees’ travel duties/responsibilities and duration of time abroad and consider the purchase of foreign coverage to make the issue black and white versus gray.”

Despite no clear consensus, following are some basic guidelines.

  • If an employee occasionally travels abroad, a week or two at a time, even up to three months, the company should rely on its domestic workers' compensation policy. It does makes sense to supplement this with a foreign voluntary workers' compensation policy. This is included in most foreign programs offered by standard carriers and is relatively inexpensive, starting at around $2,500 a year. It basically fills any gaps the domestic policy might have, most obviously endemic disease and repatriation.
  • An endemic disease is one that is particular to a country. The endemic disease coverage language of a foreign workers' compensation endorsement establishes that coverage applies to injury or death arising out of endemic disease even if the disease is not covered under the workers' compensation or occupational disease law of the designated state.
  • Repatriation expense coverage reimburses the insured for expenses over and above normal transportation costs when it is necessary to bring an injured, sick or deceased employee back to the United States. Some foreign workers' compensation coverage endorsements impose a sub-limit on repatriation expense coverage; the adequacy of any such sub-limit should be carefully evaluated. The extra transportation costs under such circumstances can be enormous.
  • If an employee is going to locate overseas for more than three months, specifically schedule him or her on the foreign policy. The employee will be charged a rate just like they he or she would under the domestic policy (albeit higher) and will receive state of hire benefits.
If the company is going to establish a foreign corporation with foreign employees working in that country, it will in all likelihood be covered by that country’s compulsory insurance program, but verify this, as each country is different.

In simple terms, for employees traveling overseas, foreign workers' compensation insurance is recommended. The coverage is relatively inexpensive and spending a small amount to protect against potentially big losses makes good risk management sense.

Many countries have strict insurance laws pertaining to liability, property and workers' compensation. Where appropriate, local legal counsel (or domestic counsel familiar with the country in question) should be engaged and a foreign insurance program should be implemented. The expertise of an insurance broker familiar with constructing a foreign insurance portfolio shouldn’t be underestimated.

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