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Interstate Workers Compensation Insurance

If you are an employer domiciled in one state, but frequently or normally do work in other states including the monopolistic states (Ohio, Washington, North Dakota, and Wyoming - where the state government sells workers compensation insurance), the purchasing of workers compensation insurance can be complicated and confusing.

Contractors, truckers, and sales companies often have their headquarters (a/k/a the domiciled state) where the company was originally started, but perform most of their work in one or more other states. This can have an impact on what states you buy workers compensation insurance for and the cost of coverage. There are several questions you must ask in order to properly insure your multi-state company.

1. In what states will the company do business in the coming year?
2. How long will your employees be in the other state(s)?
3. Are you eligible for interstate rating?
4. Will you be doing work in a monopolistic state?
5. Will you be using any subcontractors in the states where you will work?

Consider these factors:

1. In what states will the company do business in the coming year?
   When you renew workers compensation coverage for the coming policy year, be sure your insurance agent or broker and the insurance company underwriter know all states where your company will do business in the coming policy year. The states listed should be both the actual and anticipated states of operation. If the new policy does not cover all states, contact the insurer and have the policy endorsed within 30 days of issuance to add coverage for the new state. If you do not, there will be no coverage in the new state, and you will need to purchase a new policy of workers compensation insurance for the new state.
    
2. How long will your employees be in the other state(s)?
   States vary in how long an out-of-state employee can be in the state before the employer is required to have a state-specific workers compensation insurance policy. Some states require the employer to have a state-specific workers compensation insurance policy immediately upon starting to work in the state. Other states give out-of-state employers 5, 10, 15, or 30 days before an in-state workman's compensation policy must be in force. All the states not requiring immediate in-state workers compensation coverage still require the employer to have workers compensation coverage available through the domiciled state.
    
3. Are you eligible for interstate rating?
   Interstate rating is the use of an experience modification factor for more than one state. The National Council on Compensation Insurance use the interstate rating for employers who have previous experience and payroll in more than one state. The length of time you have had employees in other states and the loss experience history is used to calculate the premium charged for the multi-state exposure.
    
4. Will you be doing work in a monopolistic state?
   If your interstate company will be operating in one of the four monopolistic states, you can contact the state directly and apply for workers compensation coverage for the employees expected to work in that state. If the number of employees and the payroll is very limited, check with the state on their state-specific timeframe for the purchase of workers compensation insurance. Ohio and Washington State allow employers to be self-insured for workers compensation if they meet the financial requirements of those state.
   
   Two other possibilities for workers compensation coverage in the monopolistic states:
   
   FIRST: Be sure your workers compensation insurer knows you will have employees in the monopolistic states so they can set the appropriate premium for what is known as Part B, Employer's Liability. This coverage comes with your workers compensation coverage (Part A) and is designed to protect your company from the gap in coverage between what is required by law and what your workers compensation policy Part A provides.
   
   SECOND: Your can purchase a "stop-gap" liability endorsement, attaching to your commercial general liability policy, to defend you in any tort claim for injuries an employee incurs not covered by your workers compensation coverage.
    
5. Will you be using any subcontractors in the states where you will work?
   Some employers attempt to skirt workers compensation laws by hiring subcontractors to perform all their out-of-state work. If you take this approach, you must diligently require every subcontractor to provide proof (certificates of insurance) before you allow them to start work. If the subcontractors do not have their own workers compensation insurance, most states will hold the primary contractor responsible for workers compensation coverage, regardless of what your contract or work agreement may state on the subject. Even though your company requires all subcontractors to have workers compensation coverage, it is still wise to have your own workers compensation coverage, if for some reason the subcontractors' workers compensation coverage is cancelled and you are not notified.