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:
Why It's Needed
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. Then it is up to the state's regulatory authority (in Indiana, it's the Workers Compensation Board) 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 (travel, construction jobs, etc.).
What is Covered
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, plus 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, which is 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 (old Rule II-C).
Other States Insurance - Policy Wording
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
Form WC 00 00 00 A
1st Reprint Effective April 1, 1992
OTHER STATES INSURANCE
A. How This Insurance Applies
1. This other states insurance applies only if one or more states are shown in Item 3.C. of the Information Page.
2. If you begin work in any one of those states after the effective date of this policy and are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not listed in Item 3.A. of the Information Page, coverage will not be afforded for that state unless we are notified within thirty days.
Tell us at once if you begin work in any state listed in Item 3.C. of the Information Page.
Assigned Risk Coverage
For assigned risk policies, the Assigned Risk Supplement, Part Two - Pools, Rule IV-J.3., page RM-48, 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, effective 2/1/97 with item filing P-35(A). The table below summarizes the coverage differences.
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)
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 reimburse insured if state restricts direct payment
same as voluntary
From a residual market 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 residual 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 residual market 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 - Available Coverages, Number 3, Limited Other States Insurance (Part Three):
"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."
[Residual Market Limited Other States Insurance Endorsement.doc]
Stepping Through the Requirements of the RM Limited Other States Insurance 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: We do 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.
Having met these conditions, the endorsement directs the servicing carrier to "...pay promptly when due the benefits required of you by the workers compensation law of any state not listed in Item 3.A...." The servicing carrier would be obligated to process/defend the claim and if need be, invoke part A.2. of the endorsement which provides: "If we are not permitted to pay the benefits directly to persons entitled to them and all of the above conditions are met, we will reimburse you for the benefits required to be paid."
Adding another State to an Indiana Assigned Risk Policy
As of January 1, 2005, Indiana assigned risk policies can not be extended to provide coverage for operations in any other state i.e. a separate application is required. Previously, we had been a member of the National Workers Compensation Reinsurance Pool. By agreement, states which participate in the National Pool allow other participating states’ exposures to be combined on one policy. The National Pool states are Alabama, Alaska, Arizona, Arkansas, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Iowa, Kansas, New Hampshire, New Jersey, Nevada, North Carolina, Oregon, South Carolina, South Dakota, Vermont, Virginia.
National Pool States
- Item Filing P-35(A) Memorandum on Residual Market Limited Other States Insurance Endorsement, effective 2/1/97 in Indiana
- NCCI handout titled "Producers' Guide to Understanding NCCI's Residual Market Limited Other States Insurance Endorsement"
- NCCI booklet "The Guide to Workers Compensation and Employers Liability Policy" published April 1992 [Other States Ins - NCCI Guide excerpt 04-92.PDF]
- IRMI's Workers Comp, Section VI.E.6.
- NAIC white paper titled "Other States Coverage on Workers Compensation Policies," March 1998
- Article titled "Beware of Out-of-State Workers Compensation Exposures" by Duane Schroeder featured in the Big I Focus Magazine in May 2005.
[Other States article Big I newsletter 5-05.pdf]