Oct 1, 2015
A costly but avoidable financial exposure for businesses is what happens when an employee is injured on the job, out of state.
One third of U.S. workers travel on business. When an employee is injured on the job outside their employer's domiciled state, they are eligible to receive workers' compensation benefits under either state's system. To avoid this and all the complications that can follow, the business owner should add an "other state coverage" endorsement to the policy.
A court case some years ago illustrated how expensive it can be when the issue of out-of-state business travel is neglected. The individual responsible for purchasing work comp insurance at a construction firm failed to disclose that some employees often were working on jobs out of state. The insurance company issued the policy, excluding any "out of state" claims beyond what was included in the firm's home state workers' compensation provisions.
The firm's employee was injured while on a job in Hawaii, where benefits are considerable greater than in the home state. The insurance company was willing to pay benefits to the injured worker and did-but not the Hawaii extras. The Hawaiian court ruled that, even though the insurance company was paying some workers' compensation benefits, it was as if there was not workers' compensation coverage in place because they weren't paying up to Hawaii standards.
This opened the door for the injured employee to sue his employer directly. The insurance carrier refused to defend the lawsuit against the construction firm. Since the employer didn't travel to Hawaii to appear, there was a $1.5 million default judgment on behalf of the inured worker. The general contractor on the job site, also a defendant, bought out for $600,000, leaving the contractor holding a $900,000 judgment.
This was an expensive lapse in communication. An "other state coverage" endorsement could have been attached to the policy, providing coverage. When employees are traveling out of state, it's important to make sure their workers' compensation policy provides coverage.