As you know firsthand, every state has it’s own regulations as it relates to insurance and compliance, and it’s up to you to understand any specifics that may impact your state.
One such topic is that of “Monopolistic” states, which relates to workers’ compensation and stop gap coverage. In this post, we’ll explain what it means to be a monopolistic state, list the states and jurisdictions included, and will also provide some helpful guidance for why it’s important to check for stop gap coverage and how to get a state workers’ compensation certificate.
What is a Monopolistic State And Why Does It Matter?
According to Investopedia, a monopolistic state is one where the government owns and operates a fund that is setup to provide a mandatory insurance. “Workers’ compensation insurance is the most common type of insurance provided by monopolistic funds. Employers must purchase their workers’ comp from the state fund and private companies may not compete for the business.”
The idea for these monopolistic states is that the workers’ compensation insurance coverage can only be purchased through the state (usually through state allocated funds) and can’t be purchased through a private insurance company. In these states, there isn’t open competition and private insurance companies cannot sell insurance for a monopolistic state.
Is Your State or Jurisdiction Included?
- North Dakota
- Puerto Rico
- U.S. Virgin Islands
The Importance of Checking For Stop-Gap Coverage
Companies that have operations in these monopolistic states may have to purchase stop gap insurance in order to comply with general liability requirements that aren’t met by the bare bones workers’ compensation plans for those states with monopolistic funds.
A Stop Gap Endorsement is “an endorsement that is primarily used to provide employers liability coverage for work-related injuries arising out of exposures in monopolistic fund states (fund workers’ compensation policies do not provide employers liability coverage). If the employer has operations in non-monopolistic states, the endorsement is attached to the workers’’ compensation policy providing coverage in those states. For employers operating exclusively in a monopolistic fund state, the endorsement is attached to the employer’s general liability policy.”
In order for your organization to protect itself, you must ensure you have a stop gap endorsement if you’re in a monopolistic state.
How to Get a State workers’ Comp Certificate
Since workers’ compensation is provided by state funds for monopolistic states, you won’t be able to obtain certificates of insurance from your insurance agent who handles other policies. Instead, each state will likely have a website (for example: Ohio’s Bureau of Workers’ Compensation) that will allow you to apply for coverage, view documents, and also request a COI and the corresponding endorsements.