Comp on the Road
by Peter Schlactus, CIC, AAI [ Back To Table of Contents ]
companies often have a hard time obtaining what are normally straight-forward
protecting against this out-of-state risk.
This article will explain
why out-of-state worker injuries pose a serious problem. It will then present
solutions and discuss the challenges of obtaining them for your business.
[You] shall furnish
satisfactory evidence that the subcontractor had workers' compensation insurance
force. · ..If vehicles with drivers...are engaged under contract and the owner of such vehicles has not furnished
evidence that the workers' compensation obligation has been insured, the total payroll [or total contract price]
...shall be included...
The lesson is this: just
because a driver is an independent subcontractor, you may not simply ignore or
Workers' compensation was
designed primarily to provide workers injured in a business's base state with
statutory benefits. It will also provide the base state's benefits to workers temporarily engaged in another state. For
example, if your business has an office in Illinois and a driver travels to Wisconsin and gets into an accident, the Illinois-
based driver can still collect Illinois workers' compensation benefits.
So far, so good. The
problem is that each state's laws and benefits are different. The driver's work
in Wisconsin, may
actually be sufficient to hold you responsible under Wisconsin's workers' compensation laws. If the other state's benefits
are more generous than yours, the driver might choose to file a claim there.
Unless your workers'
compensation policy gave "Other States" coverage you could end up
having to compensate
the injured driver yourself for the other state's benefits, or at least for the difference between the benefits paid by the
other state and your own. In addition, the other state could fine you for not having workers' compensation (the fine in
Connecticut, for instance, is $10,000).
Clearly, the consequences of not properly protecting yourself against drivers' out-of-state injuries can be severe.
have three options for obtaining Other States workers' compensation coverage.
two involve naming other states on the "Information Page" of your workers' compensation policy.
The Information Page has
two places to list states where coverage applies. Normally, Other States
triggered by listing one or more states in Item 3C of your policy's Information Page. This will guarantee coverage
(under the other state's laws) should one of your workers get injured in a named state. And the coverage is free!
NOTE: You may not have
permanent, ongoing operations in the states listed in Item 3C. Report all of
to your agent to ensure that you are covered.
One option is to list
surrounding states individually in Item 3C. All states where a risk may develop
should be listed.
A better alternative is to use a formula such as "All states except [monopolistic states]." This phrase neatly provides
incidental coverage in all but six states.
You cannot purchase
workers' compensation from a private insurer in the six "monopolistic"
states (Nevada, North
Dakota, Ohio, Washington, West Virginia and Wyoming). The states' laws do not allow it.
Types of Coverages
Base Sate Named
|Nearby States Listed
on Policy Info. Page
on Policy Info. Page
|Worker hurt in
|Covered If Listed||Covered unless
Does that mean you have to buy coverage from,
say, Nevada's State Fund before you let your drivers cross the border? That's
way, but not the only one. Most commercial insurers offer a special amendment, called Stop Gap Employers Liability coverage. It's
not quite workers' compensation, but it does cover your liability for workers injured in a monopolistic state.
The table on page 28 lists the different kinds of
out-of-state losses and the workers' compensation solutions that can protect
The simplicity of solutions described in the
table can be misleading. A business may obtain Other States coverage only if its
agrees to provide the protection voluntarily. Insurers may refuse to list states in Item 3C for several reasons. The insurer may not be
licensed in some states, the state may be monopolistic or the insurer may simply not want to get involved in certain states.
With transportation companies, many insurers
become especially cautious. Permission to use the "All States Except"
Item 3C is often denied. Much depends on your agent's understanding of the risks you face and ability to persuade insurers to
Another challenge for transportation companies
arises because so many of you have to obtain your workers' compensation from
state's residual pool or fund. These are a last resort for businesses that cannot find an insurance company willing to voluntarily
provide them with coverage. Rates are normal, but there is less flexibility. Rarely can Other States coverage be obtained.
The only option for a company that has its
workers' compensation in the residual market is to apply for workers'
every state in which protection is desired. This is awkward for both you and your agent, and the best course is to seek out an agent
with access to a voluntary workers' compensation program for transportation companies.
When drivers hit the road, there's no telling
where they might get hurt. With Other States coverage securely in place, you
the flexibility to grow and meet all of your customer's needs, wherever they may lead you.
Peter Schlactus, a Certified Insurance Counselor and Accredited Advisor in Insurance, is Co-President of KBS International Corp., which provides specialized insurance programs, benefits, and risk management services to courier companies and executives nationwide. Mr. Schlactus is available to answer inquiries at 1-888-KBS-4321 or via e-mail at email@example.com.
COURIER MAGAZINE - April/June 1997 [ Back To Table of Contents ]
(c) copyright, 1999 by KBS International Corp. All Rights Reserved.