Work Comp: Extraterritoriality and Reci-What? Isn’t the Worker Covered Wherever He Goes?

Beyond knowing where employees regularly work, agents must know where employees might work during the policy period – even temporarily. Workers’ compensation coverage gaps or the complete loss of protection are possible if employees are conducting operations on behalf of the employer in states where the insured does not have a “regular” business location…an address. These extraterritorial exposures must be discovered, planed for and managed by the policy.

Workers’ comp polices offer two methods, or options, for managing the exposure created when employees are injured working in a state other than the employer’s domicile state or a branch-location state. Workers’ compensation extends coverage to states listed as either a “Primary”/ “3.A.” state or as an “Other State” also known as a “3.C.” state.

Deciding in which column, 3.A. or 3.C., to list a particular state is not always crystal clear; in fact, there is often a haze surrounding coverage for work done in other states or staffing employees from another state. Every jurisdiction regulates the extraterritorial exposure and reciprocal allowances differently.

Extraterritoriality is the statutory provision regarding work comp and the travelling employee. The key question, does the work comp protection follow the employee when he or she leaves the “home” state to work on the employer’s behalf. Reciprocity is the stance of the “receiving” state (the state to which the worker travels to work). The key question to consider with reciprocity is, does the receiving state recognize and allow the use of the work comp following the employee from his or her home state (the “sending” state)?

The battle between extraterritorial provisions and reciprocity provisions is where the problem truly lies. Even if the “sending” state extends WC protection to the travelling worker (which is most often the case), the “receiving” state may not recognize that protection, or may not fully recognize it. If this reciprocity issue is not addressed, the insured may NOT have any work comp protection – and this is BAD (when your insured has to pay the claim out of his pocket and you get sued, that is bad)!

This Thursday (8/25), the Academy of Insurance hosts a one-hour session detailing the extraterritoriality and reciprocity issue faced by your work comp clients. Register here to reserve your spot today – space is limited.

Topics Workers' Compensation