Explanation of Other States Coverage
Indiana WC Statute
22-3-2-20. Injury or death occurring outside the state.
“Every employer and employee under IC 22-3-2 through IC 22-3-6 shall be bound by the provisions of IC 22-3-2 through IC 22-3-6 whether injury by accident or death resulting from such injury occurs within the state or in some other state or in a foreign country.”
Workers Compensation Policy Sections
To understand Other States Insurance coverage, there are two sections in the standard “Workers Compensation and Employers Liability Insurance Policy” that apply:
- Part One – Workers Compensation Insurance which is Item 3.A on the Declaratiions page.
- Part Three – Other States Insurance which is Item 3.C on the information Declarations page.
Most job related injuries occur in the state where the employee is hired, regularly works or resides. However, with increased interstate business travel, the odds increase that an injury could occur outside the employee’s “home state.” An employee may attempt to pursue a claim in any state: the state of residence, the contract state, the state in which work was performed, the state of injury, and the state(s) in which workers compensation coverage was insured by the employer. It is up to the state’s regulatory authority (The Workers Compensation Board in Indiana) to take jurisdiction over a claim or deny it. There can be significant differences among state statutes regarding the eligibility of benefits for temporary workers.
Part Three – Other States Insurance of the policy (Item 3.C on the information page) is designed to provide both temporary and automatic coverage for new operations in other states, along with coverage for incidental exposures in other states. “Coverage” includes both workers compensation and employers liability insurance. It provides coverage for insured’s operations that are not “known or expected.” In other words, Other States Insurance allows an insured to have additional coverage, based upon possible exposures in states where the employer does not have current or anticipated operations. This coverage is shown by listing those covered states in Item 3.C on the policy information page.
Other States Insurance coverage stops the gap in coverage which could result when an insured has no standard WC coverage (Part One – Workers Compensation Insurance, Item 3.A on the information page) in a state. If a claim occurs, the Other States Insurance coverage allows a carrier, not authorized to make benefit payments directly in a particular state, to make those payments indirectly through the employer. The licensing issue is overcome because indemnification or reimbursement of an employer does not constitute transacting insurance in a state. It is merely a contractual liability issue created by the workers compensation insurance policy (a contract between the carrier and employer).
Operations which are known or expected are properly listed in Item 3.A on the policy information page. Reference Basic Manual Rule 3.A.18, Refer to User’s Guide A-3 for more information.
Assigned Risk Coverage
For assigned risk policies, the Assigned Risk Supplement, Part Two – Pools, Rule IV-J.3., states that Other States Insurance is “designed solely for unknown or unanticipated exposures.” The words “temporary or incidental” exposure are also used in describing the Residual Market Limited Other States Insurance Endorsement with item filing P-35(A). The table below summarizes the coverage differences.
|Coverage Issues||Voluntary Market||Residual Market P-35(A)|
|To obtain Other States coverage:||by request and optional for carrier to provide||automatic for limited coverage|
|Where coverage provided:||Part Three of policy for states listed in Item 3.C of policy information page||RM Limited Other States Insurance Endorsement|
WC 00 03 26(A)
|States included:||at carrier option; no monopolistic fund states||automatic for limited coverage in all states|
|Type of coverage:||Full Part Three coverage:|
1) full coverage for new operations commencing after policy effective;
2) full coverage for new operations as of effective date if reported within 30 days;
3) full coverage for incidental travel exposure
|Limited coverage replaces Part Three coverage:|
1) temporary, incidental or casual exposure coverage only (like interstate travel);
2) as long as no existing separate coverage & separate coverage not required by state law;
3) no automatic new operations coverage & no promise to add coverage
|Payment of claim:||Direct by carrier or reimbursement to the insured if a state restricts direct payment.||same as voluntary|
From an Assigned Risk perspective, the use of Part Three – Other States Insurance of the policy is inappropriate because it grants coverage for not only the exposure resulting from incidental interstate travel but also the exposure resulting from the actual commencement of long-term business operations in other states. By virtue of the state-specific nature of workers compensation statutes, insurers or state pools in the Assigned Risk market are not obligated to extend policy coverage beyond that which is needed to satisfy the requirements of the employer’s state of domicile. Consequently, some employers may be faced with obtaining separate policies from each state where a potential exposure exists.
The purpose of the Residual Market Limited Other States Insurance Endorsement (WC 00 03 26 A) is to amend the coverage available to Assigned Risk policyholders under Part Three of the policy. This endorsement was created to provide protection for casual exposures resulting from interstate travel by employees of those states listed in Item 3.A. of the policy Information Page. Unlike Part Three of the standard policy, this endorsement does not provide automatic coverage for actual operations in other states.
The endorsement includes an important notice which reads:
“If you hire any employees outside those states listed in Item 3.A on the Information Page or begin operations in any such state, you should do whatever may be required under that state’s law, as this endorsement does not satisfy the requirements of that state’s workers compensation law.”
This limited coverage is further explained in the NCCI Assigned Risk Supplement to The Basic Manual, Section 4:
“Limited Other States Insurance coverage is intended as coverage for an employer, of a state listed on the policy, while employees are temporarily in an ‘other’ state and where the employer’s operations in said state are not such that separate coverage is required by that state’s laws. This coverage is designed solely for unknown and unanticipated exposure in states or territories other than those designated in 3.A of the policy and not otherwise specifically excluded. If the insured has or develops exposures in any state not specified in 3.A of the policy, some separate applications may be necessary.”
Requirements for the Residual Market Limited Other States Coverage Endorsement
For an insured to meet all the conditions of the Residual Market Limited Other States Insurance Endorsement. The insured:
A.1.a. has employees who are hired under an Indiana contract of employment;
A.1.b.i. has no other WC insurance for the other state in question;
A.1.b.ii. has no known other state law requirement that the insured carry that state’s WC insurance coverage;
A.1.b.iii. is not a self-insured in that other state; and
A.1.c. the work is temporary (not begun operations in the other state).
Note: Indiana does not have a legal definition of “temporary” or what constitutes “beginning operations” in another state. This is a gray area that depends on individual circumstances that a servicing carrier will consider.
Adding another State to an Indiana Assigned Risk Policy
Indiana Assigned Risk policies can not be extended to provide coverage for operations in any other state, a separate application is required.