All Across America: The Trouble with “All States” Workers Comp Coverage

Lucky is the insurance agent whose commercial client's state of residence never changes and all their employees live and work in that same state. That would make procuring a workers compensation policy for that client easy. But, of course, life is never that simple.

Agents are often faced with the dilemma of obtaining a workers comp policy for a client who has multiple employees working in various states. That task may seem overwhelming because workers comp laws vary by state.

States have unique requirements regarding which companies need to carry coverage; which companies may be exempt from carrying coverage; and varying penalties for not having a workers comp policy in place. Further, businesses that work across state lines have unique workers comp obligations.

There is always the option of procuring separate policies from insurance carriers in each state where employees are located. If you are dealing with only two or three states, that may be feasible; but more likely, that will be a burdensome approach.

On the other hand, if one of your commercial clients needs to provide workers comp coverage for states other than the residence state of their business—and other than their primary state where they are located and work—many workers comp policies can be amended to provide the coverage required. Decades ago, this option was added to workers comp policies via the All States Endorsement. However, this is no longer an option and is an outdated term and form.

When you are procuring a workers comp policy for a client who employs people in multiple states, each state must clearly be listed on the application of insurance. When the policy is issued, be sure to review the declarations page for sections 3A and 3C for the "all states" wording on the policy. When properly used, automatic coverage will apply in all states except the monopolistic fund states.

Sometimes it seems that the carrier is trying to test your reading skills, as per the following example:

1. A. Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: IL

You should also be cognizant of this example, with words bolded for emphasis:

1. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except DE, HI, TX, FL, NV, NY, SC, SD, WI, MA, MD, IA, ME

You should be mindful of the bolded wording in these two examples. Initially, Section C indicates the coverage applies to all of the following states. However, the policy then indicates all states are covered “except” the listed states. You need to read the policy thoroughly to determine which states are covered.

If you take the time to review this section of the policy and ensure coverage is being provided to the pertinent states, you’re much more likely to avoid a failure to procure a claim if a client's employee is injured in an uncovered state while in the course and scope of his employment.

If you are notified that your client has hired a new employee that will permanently be working in a different state, you need to notify the carrier's underwriter as soon as you can and ask for the state to be added to the policy. If a revised declarations page is issued, check Section C and confirm that the states that need coverage are listed.

To verify that "all states" coverage is present on a specific policy, just check the declarations page—it should be obvious. Covered states must be listed in the declarations so, whenever you receive a copy of the policy, be careful and fully review it.

About the author

Barbara Rocco is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the office in Chicago, Illinois. Insurance products underwritten by Swiss Re Corporate Solutions America Insurance Corporation, Kansas City, Missouri, a member of Swiss Re Corporate Solutions.

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group ("Swiss Re") and/or its subsidiaries and/or management and/or shareholders.

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