A discussion with Kendra DePaul, BWC Other States Coverage Manager, and Jim Klingensmith, Independent Insurance Agent
Since implementing BWC’s Other States Coverage program in March 2016, we have received applications from over 200 Ohio employers looking for coverage outside the state of Ohio. We have been happy to assist these employers in meeting their workers’ comp liability and have answered many questions along the way.
The questions are understandable, as workers’ comp is a complex system. Apart from a few federal programs for certain occupations such as coal and marine exposures, there is no federal system for workers’ comp. Instead, each state has established its own rules, laws and benefit levels. Considerations need to be made of each state an employer sends employees into to ensure that proper coverage is in place.
Often, when we receive applications, the employer wants an “all-states” endorsement or may be traveling in all states and wants a policy that will protect them wherever their business may take them. This is understandable, as it is often hard to predict where a job will be won or where a new client will be located. Although there are options for the employer to secure coverage, there is not the ability to simply purchase a policy covering all states. Because of the peculiarities of each state, we do need to know what states an employer wants on its policy so that we can properly price and quote the coverage and ensure that claims will be covered if filed.
Given the complexity of this issue, I asked Jim Klingensmith, a seasoned independent insurance agent and a Certified Workers’ Compensation Advisor (CWCA), to weigh in on the topic. Jim works out of an agency in Canfield, Ohio and is a member of Ohio Insurance Agent’s Association’s Workers’ Compensation Committee.
Kendra: Jim, you have clearly been advising clients on workers’ compensation for many years. It is my understanding that the “Broad Form All – States” endorsement for workers’ compensation was eliminated in the 1990s. And now it is important that employers list the states with known exposures on their policy. What information do you typically provide your clients who have operations or may have operations in several states?
Jim: We always make it clear to them that it is imperative that at policy inception, any states in which they already have ongoing operations, a contract to work in during the policy year or know that they will absolutely be working in during the policy year, must be listed in Item 3.A. (Workers’ Comp states) portion of the Workers’ Comp application. Failure to do so, could be cause for declination of coverage.
And of course, they will also have to list any other states in which they have a physical presence (office, satellite office, temporary office, etc.). It is also suggested that if their corporation was filed for in another state, that the state of incorporation be listed, if it is different than where their regular operations and office are located. Item 3.C. of the application (other states insurance) is to be used to list the states that they reasonably anticipate working in, but have no current known exposure in those states, thereby allowing for temporary coverage until reported (must be within 30 days).
Kendra: As Jim mentioned, there is a section of standard workers’ compensation policies (3C) that provides temporary coverage for new exposures an employer may have over the course of the policy year. If an employer begins work in a new state, they should call us to have the new state added to the policy. It is a simple endorsement that can be done quickly. Jim, why is it so important that states with known exposure are listed in 3A of the policy?
Jim: Because Item 3.A. (also titled Workers’ Comp States), is where the employer is actually applying for Workers’ Compensation coverage for the states that have a known exposure. If the employer doesn’t list the states with known exposures, then coverage is not applicable after “30 days” have passed without the exposure being reported…NO EXCEPTIONS!
Kendra: What about a client who is just “passing through” a state? Do they need to get coverage if they are only there for a short time?
Jim: This is a Hot Topic in the Workers’ comp world. The safest way to avoid a gap in coverage, is to list under Item 3.C. (other states), the states that you reasonably anticipate that you might enter into during the policy year. WITH THE UNDERSTANDING THAT 3.C. (other states coverage) PROVIDES TEMPORARY COVERAGE FOR 30 DAYS. And technically, even though there is a 30 day reporting clause, there is an important clause in the policy that states “Tell us (the insurer) at once if you begin work in any state listed in Item 3.C. of the information page (application). The insurer is utilizing these measurers within the contract (WC policy) to exercise a degree of control over the loss potential. In other words, the bigger the claim the more the insurer will look to the contract (WC policy), and hold steadfast to the language (warnings and/or clauses).
Kendra: There are a few states that are monopolistic and cannot be include on a private insurance policy. Ohio is one of the monopolistic states, but so are Washington, Wyoming and North Dakota. What would you tell clients who have operations in these states?
Jim: They must be sure to purchase Workers’ Compensation coverage directly from each of the states you mentioned, because there is no other way from them to have coverage. Which aside from Ohio, are Washington, Wyoming and North Dakota.
Kendra: I think the best direction we can give employers doing business outside Ohio, is to provide us with as much information as possible about where and how often you are traveling so that we can make sure proper coverage is in place. Jim, do you agree?
Jim: Yes, I do agree. Providing the right information upfront, as well as adhering to the stipulations of Workers’ Comp policy, especially the reporting requirements. The safest way for the employer to list their potential exposures under Item 3.C. (other states), is to utilizing the following wording on the application for Item 3.C. “All states except North Dakota, Washington, Wyoming and those listed in Item 3.A., with the understanding that, in order to be safe, the employer should notify the insurance company as soon as work has begun in any state not listed in Item 3.A., and not wait for the 30 day reporting period to go by.
Kendra: Jim, living on the Ohio – Pennsylvania border, I know you often deal with this issue. Any other information you would like to share?
Jim: The most important point that any employer should pay attention to, is the fact that when it comes to insurance, especially Workers’ comp, an open channel of communication is critical to being properly insured. Otherwise, the employer will be paying for an employee’s injury out of their own business checking account, and in some states, their personal checking account as well!
*The intent of this blog post is for general information purposes only. We do not intend it to be a full and complete description of the law, nor as legal advice. This information is subject to change. Therefore, we cannot guarantee it is the most current and correct information. Employers should consult an insurance professional, private counsel, or the workers’ compensation agency in the other state to verify requirements of that state.