Worker’s Compensation coverage is a subject that is often out of sight and out of mind for many contractors.  But when a contractor takes a project in another state, Worker’s Compensation coverage should be front and center for consideration.  Few contractors realize that their Workers’ Compensation policy may not respond to employee-related injuries arising from those out-of-state projects.

Some common Worker’s Compensation coverage traps awaiting traveling contractors include the following:

  1. Working in a monopolistic state without a state-specific policy for that state. Monopolistic states (e.g., Ohio, Washington, Wyoming and Norther Dakota) require contractors to purchase state-specific Worker’s Compensation policies from a state-administered fund.  A contractor working in a monopolistic state without such a policy could very well have no Worker’s Compensation coverage for that particular project.  The reverse can also be the case – a monopolistic-based contractor should not rely on its state-specific policy when traveling outside of that state.
  2. Traveling through a state without broad “Other States” coverage language. An employee driving through a neighboring state to a project in a third state (e.g., an Indiana-based worker traveling through Kentucky to get to a project in Tennessee) could expose a traveling contractor to an uninsured Worker’s Compensation claim.  Item 3C on a standard NCCI Information Page should broadly include all states.  Be aware, however, that even broad Item 3C “all states” language will not provide coverage for workers driving through a monopolistic state.
  3. Over reliance on broad “Other States” coverage under Item 3C.  Some states (e.g., New York, Illinois) require explicit mention of the target state in Item 3A and reserve the right to fine contractors who rely exclusively on broad “all states” language in Item 3C for Worker’s Compensation coverage in that state.  Other states (e.g., Kentucky) require notice from a carrier that its insured working in Kentucky has Worker’s Compensation coverage.  Relying on broad “all states” language in Item 3C fails to provide a carrier with notice of an out-of-state project, and, without such notice, the carrier cannot provide notice of coverage to the target state.

Do you have questions about the scope of your company’s insurance coverage program?  Call us.  We are the attorneys of Manion Stigger, and we have extensive experience counseling contractors in insurance coverage matters.