David owns a business in North Carolina and has won a contract for work in Missouri. The contract requires three of his employees to be in Missouri for a month. If one of those employees is injured while in Missouri for work, will his workers’ comp policy cover the injury?
It’s a simple question, but one with a complex answer for both employers and insurance agents. Determining whether an injury will be paid when an employee travels out of state can seem next to impossible. When a business needs to send employees out of state for work, there are several considerations.
PRIMARY CONSIDERATIONS
Businesses must list any state with an office location or active, ongoing operations as a primary state on their workers’ comp policy. The recent rise in remote work has required businesses to add states where workers reside in addition to where the business is located. Additionally, Part 3 of the workers’ comp policy says that if a state is listed in item 3C—the other states portion of the policy information page—“all provisions of the policy will apply as though that state were listed in item 3A of the information page.” Some insurance companies will add an all-states endorsement to the policy, though even that is not all-encompassing: Private insurance companies cannot extend coverage into a state that operates its own workers’ comp system (Ohio, North Dakota, Wyoming and Washington).
Every state has some mechanism to provide coverage to businesses that cannot acquire coverage in the voluntary market. These take different forms in different states, but almost all of them share one thing in common: They will not extend coverage outside of the state where the policy is written. Some states will add an amended version of Part 3 of the policy, limiting their out-of-state liability to a maximum of 30 days. In a few, the insurance company will offer an extension of coverage provided by a third party for an additional premium. But in many states, there is no option under these last-resort policies to extend coverage for any out-of-state exposures the employer may face, putting them in a precarious position.
HOME VS. AWAY
State workers’ comp laws provide for what is called extraterritoriality, defining whether coverage for an in-state employee follows them should they travel out of state. All states provide some extraterritoriality, though many have caveats that could create holes. Some states also have well-defined time limits, but many do not specify when an employee is no longer covered by their home state.
Once a company determines whether workers’ comp covers the employee traveling out of state, next it must consider reciprocity—whether the state the employee travels to recognizes coverage from the home state. This is where things get sticky. Many states reciprocate coverage only with states where there is a mutual reciprocity agreement, and some don’t reciprocate at all. Other states allow reciprocity for only certain types of businesses, primarily impacting the construction industry. Notably, both Florida and New York require any construction-related business to have their state listed as a primary state on a workers’ comp policy for the employer to operate in their state legally—even on a short-term basis.
RISKY BUSINESS
General liability policies follow employers wherever they travel in the United States, so it can be easy to forget that workers’ comp has its own unique set of rules. While this isn’t an issue for employees that are traveling to meetings or conferences in another state for a few days, beyond that, it becomes important to discuss out-of-state work with your insurance agent. The complex maze of workers’ comp rules means that it is possible an employee could suffer an injury while traveling out of state, and their claim is later denied by the insurance carrier. This can leave the employer in a situation where they face paying for the injury out of pocket, or worse: facing a large lawsuit.
State-by-state variability can leave employers in a situation where it is difficult to be certain the policy they have purchased will provide the coverage they expect in the event an employee suffers an injury. Some states lack explicit provisions simply because that portion of the workers’ compensation act hasn’t been revised in decades; others have eliminated reciprocity as a protection mechanism to prevent out-of-state contractors from taking advantage of lower rates in their home states. Employers are sometimes forced to purchase a stand-alone policy for the state they are traveling to, an expensive and difficult task just to handle a short trip.
The best solution for any employer will be unique to their situation. Employers should rely on the counsel of a trusted, experienced insurance agent to ensure that they have the protection they expect—no matter where they send their employees to work.
