Previously, we wrote a post that outlines an important nuance that applies to workers’ compensation coverage—monopolistic states—which creates a gap in coverage in select states and jurisdictions.
Another consideration for organizations that track compliance of vendors and subcontractors is that a workers’ compensation policy may only apply to one state. Insurance for workers’ compensation coverage is state-by-state, and each state has its own rules and regulations that serve to govern how this applies.
It can be common for a subcontractor or vendor to be based in one state or working on a specific project and then either transfer to another state for a project or move on his or her own to begin working in a new state. If that subcontractor or vendor is injured on the job, it can open up a HUGE set of complications when workers’ compensation isn’t valid in the new state. The problems occur when the employee elects to file a claim in a state where the employer does not have a physical location and the employer does not have workers’ compensation coverage.
Each State Exercises Its Own Jurisdiction in 3 Ways
According to a recent IRMI article that outlines workers’ compensation matters, it explains that states will exercise their jurisdiction in the following three general ways:
- All states will apply their jurisdiction if the injury happens within their borders.
- Forty-three states will apply jurisdiction if the contract of employment was made within the state.
- Forty states will apply jurisdiction if the employment is principally located in that state and the employee is injured in another state.
IRMI explains that the only exception to these examples of state jurisdiction is that 15 states will not apply their law to out-of-state employers with insurance under another state law. However, these states are in the minority.
What Should You Look For On COIs To Ensure Coverage?
Because a workers’ compensation policy may only apply to one specific state, it’s critical to review each of your subcontractors’ and vendors’ certificates of insurance to ensure your organization is protected.
Of course, insurance carriers attempt to limit their exposure to claims occurring where they may not have claims offices, or knowledge of the workers’ compensation statutes. The states take a much broader approach, according to AMAXX. The workers’ compensation statutes of most states specify exactly when and how their specific act applies out of state. Normally, the specific statute will indicate that if the contract was negotiated within their state, their workers’ compensation laws apply regardless where the injury occurs. The article goes on to say:
“Most state work comp statutes will have extraterritorial provisions that state if the principal place of employment is within their jurisdictional boundaries, a work comp injury occurring outside of the state boundaries is still covered by the state law. The work comp statutes also normally specify that any work related injury occurring within their borders is subject to their workers’ compensation statutes, even for employers and employees whose place of business is not within their state line boundaries.”
To ensure coverage—regardless of your state or jurisdiction—your compliance administrators must check each certificate of insurance document and associated workers’ compensation policy coverage to verify that the policy would cover that vendor or subcontractor should he or she be working in a different state and incur an injury while doing a job for your organization.
On the certificate of insurance, be sure your compliance team verifies:
- Limits of liability for each policy shown on the certificate, which may include employer’s liability, excess liability and workers compensation
- Owner information, information as to whether the Owner, Partners, LLC Members or Corporate Officers are included or excluded from workers compensation coverage
- Waivers of Subrogation protecting the correct entities
Injured workers can pose a big enough problem on their own, even without introducing the problem with workers’ compensation and the state-by-state regulations. Be sure your organization is protected by checking each and every COI for all vendors and subcontractors.
Utilize Insurance Tracking Services To Ensure Coverage
Insurance tracking services like myCOI exist to help your compliance administrators handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. The software is an easy-to-use, cloud-based solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the COI communication process and ensure you remain protected.
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