Workers’ Compensation – Multi-State Exposures
September 2, 2014
Author: Hope Haverland, Account Administrator
Workers’ Compensation exposure can be complicated in the world of trucking. The main reason for this is due to the trucking company being domiciled in one state, the truck driver living in another state, and accidents/injuries occurring in a third state.
Brief Overview: What is Workers’ Compensation Coverage?
Workers’ Compensation is purchased by employers to comply with state and federal workers’ compensation laws. As indicated in its name, it provides compensation for workers/employees who become injured while on the job. The limits of compensation are statutory. In other words, limits of compensation differ for each state in which a claim occurs. Employers’ Liability is also included in a workers’ compensation policy which grants coverage for the employer when a work-related claim does not fall under the workers’ compensation statute.
Issues for Trucking Companies with Multi-State Exposures and How to Combat Them:
Most trucking companies have clerical, sales, warehousing, and garage employees. The bulk of the employees, however, are drivers who could be traveling interstate or intrastate. Because Workers’ Compensation is a statutory coverage as noted above, the laws in each state vary and this can cause extraterritorial issues for the trucking company.
If a trucking company has terminals in several different states, the insured must be aware that the workers’ compensation laws vary from jurisdiction to jurisdiction. For example, a trucking company’s office and terminal could be domiciled in the state of Montana, which requires someone within the state to handle an insurance claim (an in-state claims adjuster). Montana is unique because the employer isn’t allowed to be involved in the claim handling process, which differs from many other states. Certain states, such as North Carolina or Michigan, allow an adjuster to work directly with the insured on settlement, which includes keeping the insured updated on medical statuses.
To take the burden of time and self-education of specific workers’ compensation issues off of the trucking company, it is often recommended that the company employ a broker that has in-depth knowledge of the laws and what coverage may be necessary to accommodate each state in which business is conducted. This ensures that when there is a claim, the trucking company may rely upon a broker with dedicated claims adjusters in each jurisdiction or with knowledge of the state’s laws in order to properly handle the claim in an efficient manner; which in turn allows the company to continue normal business operations without significant interruption.
Employers should also be aware of the impact on employee selected benefits when an employee is injured outside of their state of residence. An employee may seek to recover another jurisdiction’s benefits as long as they qualify. Typically they seek benefits from the jurisdiction providing the highest income benefits.
An example would be if a driver is hired and working out of the state of Minnesota, but the driver gets in an accident as well as lives in the state of Missouri. Two jurisdictions could apply. The claim could initially be handled out of Minnesota, as this is the state of employment. But the claimant may seek legal representation and fight for Missouri jurisdiction. There is potential that the employee could be paid benefits in the first state in which he or she qualifies and then goes to the second state to collect further benefits. This can also be referred to as “Piggybacking Benefits.” Piggybacking can be dangerous for trucking companies who do not understand the degree of the laws. It is therefore important for a trucking company to employ a broker who will work to help secure the broadest coverage under sections 3A – Mandatory State Coverage and 3C – Other States Insurance on the workers’ compensation policy; especially in sections 3A and 3C of the policy that provides “all other states” coverage in section 3C.
Be aware that a company with employees who are hired, live, and drive through different states may create coverage and claim handling challenges if claims arise. Workers’ Compensation coverage can be complicated for non-insurance professionals. Trucking companies in need of such coverage should consider working with a broker who is a conduit of insurance expertise and education, is able to market appropriate insurance carriers, and employs dedicated claims adjusters capable of handling each jurisdiction in which the company conducts business. Finding the right workers’ compensation insurance partner will not only help protect the assets and recoup losses for a company, but may allow relief for a seemingly more important concern, peace of mind!
- Gallagher M. (2013). States of Confusion: Workers Compensation Extraterritorial Issues. Resources, pp. 4-9