Q We are currently working with a Wisconsin domiciled contractor who has no other location. This contractor has in the past and will in the future perform work in other states. Many of the jobs will take up to six months or longer to complete. The contractor sends residents of Wisconsin, who are his employees, to these states to complete the work. Often housing arrangements are made for the employee(s) in the state where the work is performed. The contractor has been operating in this manner for 10 years.
Under the contractor's current Workers Compensation policy, Item 3A. indicates that coverage applies to the Workers Compensation Law and any Occupational Disease Law of each of the states listed here: Illinois, Wisconsin. The contractor is doing work in many other states including some monopolistic states.
Six questions arise:
(1) Should Item 3A include all states in which the contractor has or anticipates work in the coming year?
(2) Would Item 3C. of the standard Workers Compensation policy cover this exposure if the states are not listed in 3A?
(3) Should the contractor purchase Workers Compensation coverage from the monopolistic state fund if working in those states?
(4) Should separate Stop-Gap Employers Liability coverage be purchased for those monopolistic states that do not offer the coverage?
(5) If the work performed in other states is totally subcontracted with the exception of Contractors Executive Supervisor or Construction Superintendent (Code 5606), how should coverage be provided in monopolistic states?
(6) Should this contractor have been subject to an interstate experience modification rather than an intrastate modification given the period of time interstate work has been performed?
A First, our disclaimer: The Rough Notes Company, Inc., is not legal counsel and we cannot give legal advice. What we can do is offer some things to think about with regard to the coverage or claim and one possible interpretation.
Let's take a look at your questions one at a time:
(1) Should Item 3A include all states in which the contractor has or anticipates work in the coming year?
Item 3A must include all states where the insured has workers compensation operations at policy inception. If at policy inception an insured has operations in a state that is not listed in 3A, the insured must contact the insurer and endorse the policy within 30 days or there is no coverage for that state.
The states listed in 3A are those states where there are actual or anticipated operations. Anticipated operations can be added on an "if any" basis. By adding them on an "if any" basis, they become covered states. Adding the states the insured is reasonably sure will have operations under 3A instead of 3C may save the insured a little time and paperwork farther down the road because of the notification process required of a 3C state. Any time the insured actually begins an operation in a 3C state, the insured must immediately (actual wording is "at once") notify the insurer. This is a policy provision that is easy to overlook.
Those states listed in 3A are covered states for workers compensation insurance. Monopolistic state funds cannot be covered in 3A.
(2) Would Item 3C of the standard Workers Compensation policy cover this exposure if the states are not listed in 3A?
If the insured has any possibility of operations in states other then those listed in 3A, those other states should be listed in 3C. Monopolistic state funds cannot be listed in 3C.
If an insured actually begins operations in a 3C state, the insurer must be notified "at once" per the policy language in order to trigger coverage (Part Three--Other States Insurance, Paragraph B).
(3) Should the contractor purchase Workers Compensation coverage from the monopolistic state fund if working in those states?
You must refer to the requirements of each monopolistic state to determine whether or not that state requires the purchase of insurance. If the job is very limited in length and payroll, the insured may not necessarily be required to purchase coverage; however, in our litigious society, consideration of the purchase of insurance protection is always a wise idea. It is highly recommended if the insured has repeated exposure.
(4) Should separate Stop-Gap Employers Liability coverage be purchased for those monopolistic states that do not offer the coverage?
There are two options to provide Employers Liability coverage in monopolistic states. The first is an endorsement to the standard NCCI Workers Compensation and Employers Liability Insurance policy. Endorsement WC 00 03 03 B--Employers Liability Coverage Endorsement has been designed to add the coverage to the standard policy for monopolistic states except Ohio. For Ohio, a separate endorsement, WC 34 03 01 B, is available. This option triggers Part 2 of the Employers Liability coverage of the standard insurance policy--with a few exceptions--so read the endorsement carefully if you are going to use it.
The second option is an endorsement to the insured's commercial general liability policy adding the employers liability coverage for the monopolistic state(s). These CGL endorsements are sometimes referred to as "stop-gap" liability endorsements; and as there are no true ISO or other rating bureau standards, they are manuscripts in nature. Each insurer may have its own version, if it offers the coverage at all. Thus, because coverages will vary, the endorsements must be read and evaluated carefully. Normally, the coverage is provided by modifying the employers liability exclusion in the CGL policy.
(5) If the work performed in other states is totally subcontracted with the exception of Contractors Executive Supervisor or Construction Superintendent (Code 5606), how should coverage be provided in monopolistic states?
You must bear in mind that many state jurisdictions hold a contractor responsible for the workers compensation coverage for any uninsured subcontractor. Even if the insured hires only supervisors and subcontracts all of the actual work, the insured may still need workers compensation protection and thus need to purchase a policy for the monopolistic state(s) to meet the required legal obligations.
It should be the standard operating procedure of any contractor who hires subcontractors, to require certificates of insurance from them in all cases, in order to verify the existence of workers compensation protection (as well as general liability coverages). A standard program of requiring certificates of insurance goes a long way to protect a contractor from the legal obligations of workers compensation coverage on subcontractors, but it is not an absolute solution. A combination of certificates and insurance coverage provides more adequate protection.
(6) Should this contractor have been subject to an interstate experience modification rather than an intrastate modification given the period of time interstate work has been performed?
The duration of time the insured has had work in other states and the premium developed in each of those states are important items. You must evaluate both of those factors and compare them to the individual state's(s') premium threshold for experience rating to determine if the insured is eligible for an interstate modification factor. The insured usually must meet a minimum premium threshold for two or more consecutive years to qualify.
NCCI makes available a number of relevant publications that provide information and resources on many of the issues you have brought to light as they relate to interstate situations. Also, sitting with a workers compensation auditor from one of your main workers compensation providers (preferably the one that is covering this particular insured) should be able to help you understand and evaluate the interstate workers compensation issues.*
©COPYRIGHT: The Rough Notes Magazine, 1998