Workers compensation insurance was and is by its very nature a compromise. In agreement for not allowing your employees to sue you for injuries that occur on the job, these same workers gain the benefits for injuries and accidents that are spelled out in your state’s workers compensation statute. Whatever the statute says determines when and how much the injured worker will receive. And this compromise keeps business and commerce humming along with much less disruption. But we have 50 states in this country and thus 50 different sets of statutes and rules. So what happens when you cross state lines to do work or to hire other employees? That’s when things become more complicated.
First of all, as you read this article, bear in mind that our starting point and our vantage point is North Carolina and North Carolina workers compensation insurance rules. If your business is located in some other state, then some of what you read in this blog may or may not apply to you. Please keep that in mind as you read further.
There are several ways in which going out of state can get a company in trouble with workers compensation rules and laws. The most vulnerable businesses are those who can pick up and go to another state to perform work there. Usually this applies most to artisan contractors whose work opportunities here in North Carolina may be diminished by the economy and so they chase storms and other natural disasters to find work in other states.
If a contractor with a NC workers compensation insurance policy takes their North Carolina employees (those who live in NC and were hired in NC by your NC based company) to do work in other states, then their North Carolina workers compensation policy will protect them from losses that may happen on these out of state jobs. But, if a contractor hires new employees who live in this other state, then that contractor is risking a coverage gap. You see, some states have more generous benefits to injured workers. Some will allow injured workers to choose which state (either the state they live in or the state they worked in or the state where your business is domiciled) work comp rules they want to file their claim under. Of course these newly injured employees of yours will choose the state with greatest benefits for them and their claim. If that happens to be a state other than NC, then you may be paying some of the claim yourself. This is because your NC workers compensation policy could be limited to the benefits stipulated by NC workers compensation law.
There are several solutions to this problem. The safest solution is to let your insurance company know who is working where and let them add the appropriate state rates and class codes for those workers to your policy. A catch all type of solution which is less fail safe, is to endorse the all states endorsement on to your workers compensation policy. The all states endorsement on a NC workers compensation policy will extend benefits for your policy to match those of the states listed on the endorsement.
Another area where employers can run into trouble is with the employees who live in a different state from the one in which the business is located. This often happens with businesses located near state lines. If your business is based in NC but you are near the Virginia border for instance, you may hire employees who live in Virginia. If this happens, then you should add Virginia rates and class codes to your NC workers compensation policy for those employees on your staff.
The last trip wire to watch for in all of this is the monopolistic state fund states. These are states that require that all workers compensation insurance in their state be written by the state government workers compensation program. This means that no private insurance companies are allowed to write workers compensation insurance in these states. If you operate in one of these states and have a claim there, your only protection on your NC workers compensation insurance policy will have to come from the employers’ liability insurance section on your workers compensation insurance. This may be suffice if your exposure is only incidental but if you are running ongoing projects and operations in that state or hiring employees that live in that state, my advice is that you purchase a policy from that state’s monopolistic state fund. Don’t take chances here, the risks are just too great to ignore.
When it comes to workers compensation insurance, all of the simplicity of the policy disappears as soon as you start crossing state lines for work or for hiring. You should make sure that you keep your agent informed of what you are doing and where you are doing it. Clinard Insurance Group, located in Winston Salem, is an agency with a great deal of experience in the North Carolina workers compensation business. If we can help you with your workers compensation insurance questions in NC, please feel free to call us, toll free, at 877-687-7557.
The Insurance Answer Guy 