You might think your workers’ compensation covers all work-related injuries and illnesses. This could prove a costly mistake.
In most cases, workers’ compensation will cover work-related injuries and illnesses. But in certain special circumstances—which might apply to your company—the basic workers’ compensation policy will not provide coverage. This could leave your company on the hook for a costly workers’ compensation claim.
Out-of-State Coverage
On any work day, how many of your employees are on the road or working from home? U.S. residents logged 452 million person-trips for business purposes in 2013, says the U.S. Travel Association. Person-trips involve travel of 50 or more miles, or an overnight stay in paid accommodations. Many of these trips involve out-ofstate travel.
Many employees also telecommute. A 2013 Harris poll found that one in 10 U.S. workers worked either exclusively from home or mainly from home. Either business travel or telecommuting could pose workers’ compensation claim problems. Did you know that an employee injured in another state while on business may be able to elect to receive benefits in that state if…
| • The injury takes place there • The employee’s principal place of work is located there • The employee entered into a contract of employment there • The employee lives there • The employee is principally located there. |
Although the typical workers’ compensation policy provides out-of-state coverage, it provides only the level of benefits required by state law. If an injured employee opts to receive benefits in another state, you might have a coverage gap if that state provides more generous benefits.
Further, the typical policy limits out-of state coverage to employees “who are hired in (state) and…temporarily working anywhere outside of (state) on a specific assignment.” This disqualifies telecommuters who live outside the state or who are working outside the state on a more permanent basis.
Finally, failure to have coverage in the state of injury may void the “exclusive remedy” protections of the workers’ compensation system. This risk increases if your employee is working out of state on a more permanent basis. With the “exclusive remedy,” an employee foregoes the right to sue in exchange for receiving medical treatment and lost time benefits guaranteed by state workers’ compensation law. If the exclusive remedy doesn’t apply, an employee may file a civil lawsuit against you for his or her injuries.
Do You Need “Other States Coverage”?
Other states insurance gives you coverage to meet your workers’ compensation obligations under the workers’ compensation law of any state listed in your policy’s declarations page. It does NOT apply to the monopolistic fund states: Ohio, North Dakota, Washington and Wyoming. These states have a state-controlled workers’ compensation plan and prohibit private insurers from writing mandatory workers’ compensation coverage in their borders. It also does not apply to Canadian provinces. To obtain coverage for these areas, you need an “extended protection endorsement.”
Some workers’ compensation insurers (particularly smaller ones) have licenses in only one or a few states. Your insurer cannot pay your employees directly for a claim if the injury occurs in a state for which your insurer lacks a license. To protect your business, you can ask the insurer to word your policy so that it will reimburse you for any benefit payments you have to make.
Finally, consider the risks involved when an employee travels overseas for work. Courts have often ruled that an injury or illness that an employee suffers while on short term assignment away from home—even if he or she is not working when it occurs—is work-related. But a basic workers’ compensation policy will probably not cover this type of claim. A foreign workers’ compensation policy will. Although no law requires employers to provide this coverage, you risk paying medical and lost-time costs out of pocket if you do not have coverage and a traveling employee becomes injured. Consider the fact that medical evacuation alone can cost more than $50,000, and a complicated case as much as $250,000. Buying coverage makes good financial sense!
Volunteer Coverage
Most states do not require nonprofit organizations or public agencies to provide workers’ compensation coverage to unpaid volunteers. But some organizations opt to provide coverage, for several important reasons. Some feel a moral obligation to provide protection to their valued volunteers. This can affect morale: volunteers who have this coverage know they will not have to pay medical expenses out of pocket for any injuries occurring from their volunteer work.
Covering volunteers as employees can protect your organization from litigation in ambiguous cases, as when a worker is sometimes paid and sometimes unpaid. Finally, without the “exclusive remedy” of workers’ compensation, an injured volunteer can sue your organization in court, creating a much larger risk exposure.
If your nonprofit organization chooses to cover volunteers, your board of directors or other governing body must first adopt a resolution to provide this coverage. If your workers’ comp carrier won’t cover volunteers, you might want to provide volunteers with accident and medical insurance…and be sure to have adequate limits on your commercial general liability policy.
An analysis of your workers’ compensation risk exposures could turn up other potential coverage gaps.
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