Workers Compensation in Other States: What s a Regional Carrier to do? Thursday, February 28, 2013, 11:10 a.m. Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS Director of Education Insurance Journal Academy of Insurance Matthews, N.C. Christopher J. Boggs, the director of education with Insurance Journal s Academy of Insurance, is charged with managing all operations of the academy including researching, preparing, and presenting technical insurance training webinars; managing a group of renowned instructors; developing and managing the online training schedule; and promoting the academy. One of Boggs current projects is the creation of continuing education classes for CE providers to license rather than spending their time developing a class. Beyond these duties, Boggs also writes articles, white papers, mini books, and books covering a wide array of insurance and risk management topics. Prior to being appointed director of education, Boggs was an associate editor with Insurance Journal, writing most often for its MyNewMarkets website. As associate editor, Boggs produced and edited articles and commentaries focused on coverage issues, market trends, policy comparisons, and risk evaluations. During his tenure in this position, Boggs authored more than 250 insurance- and risk management-related articles on topics as diverse as credit default swaps, the real purpose of the MCS-90, and the truth about enterprise risk management. With more than 22 years in insurance and risk management industries, Boggs background prior to the Insurance Journal includes experience in loss control, insurance production, consulting, and teaching. Besides the Insurance Journal, Boggs articles and research papers have been featured in International Risk Management Institute's The Risk Report, The John Liner Review, RIMS' Risk Management magazine, the American Public Power Association magazine, and several CPCU s Risk Management Interest Group magazines. In addition to his professional experience and activities, Boggs has written and published five insurance and risk management books. Boggs released his first two books in 2009: "The Insurance Professional's Practical Guide to Workers' Compensation: From History through Audit," in April, which is already in its second edition, and "Business Income Insurance Demystified: The Simplified Guide to Time Element Coverages in August., The second edition became available in July 2012. Boggs third book, Property and Casualty Insurance Concepts Simplified: The Ultimate How to Insurance Guide for Agents, Brokers, Underwriters and Adjusters, became available in April 2010. Wow! I Never Knew That! 12 of the Most Misunderstood and Misused P&C Coverages, Concepts and Exclusions, Boggs fourth book, hit the market in 2011, as did his fifth book, Insurance is Not Risk Management! The
Insurance Professional s Guide to Risk Management and Insurance. A graduate of Liberty University in Lynchburg, Va., with a bachelor s degree in journalism, Boggs has continually pursued career-related education, obtaining nine professional insurance designations. These are the Chartered Property Casualty Underwriter, Associate in Risk Management, Associate in Loss Control Management, Legal Principles Claims Management, Accredited Advisor in Insurance, Associate in Premium Auditing, Certified Workers Compensation Advisor, Construction Risk and Insurance Specialist, and the Associate in General Insurance designations. Session Description: Questions discussed and answered in this session will include: What are the coverage concerns for regional carriers that are not licensed to write workers compensation coverage in all states? What are some general underwriting questions to answer when considering the other states exposure? What are the rules for deciding which states must be listed as either a primary or other state? Which states should be listed as either a primary or other state? Attendees of this session will learn: The concepts of extraterritoriality and reciprocity and how state laws differ; The rules for deciding which states need to be listed as either 3.A. states or 3.C. states (and what the difference is); and How to solve the problems that arise when/if an insured has an operation in a state in which the insured is not licensed. Top Three Session Ideas Tools or tips you learned from this session and can apply back at the office. 1. 2. 3.
Workers Compensation in Other States: What s a Regional Carrier to do? Session Outline Overview Concepts Surrounding WC Coverage for Other States Out-of-state Problems Why Where Workers Work Matters Potential Employee Options Four Jurisdictions Which State has Jurisdiction? Significant Contact Test Contract of Hire Test Reciprocity & Jurisdictional Issues Three Levels of Reciprocity Listing Primary & Secondary States States That Must Be 3.A. States That Should Be 3.A. Underwriter Prerogative & Requirements in 3.A. Other States Listing States that Must Be 3.C. Preferred Other States Wording o Why You May Refuse the Recommended Wording Minimum Other States Considerations Example of Best Wording Penalties for Non-Compliance How to Manage States Where You are Not Licensed Questions & Answers
WORKERS COMPENSATION IN OTHER STATES: WHAT S A REGIONAL CARRIER TO DO? Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS Director of Education Insurance Journal Academy of Insurance AGENDA FOR THIS SESSION Concepts Surrounding WC Coverage for Other States Why Where Workers Work Matters Initial Employee Options Which State Has Jurisdiction? Reciprocity & Jurisdictional Issues Listing Primary & Secondary States Penalties for Non-Compliance How to Manage Coverage Where You Are Not Licensed 2013 NAMIC Commercial Lines Seminar - Boggs Page 1 of 11
OUT-OF-STATE PROBLEMS Out-of-State problems arise at the junction of two concepts: R E C I P E X T R A T E R R I T O R I A L I T Y O C I T Y WHY WHERE WORKERS WORK MATTERS Coverage and limit gaps can be created Each state regulates the out-of-state employee exposure differently Out-of-state employee exposure managed by one of three methods: As an additional Primary state; As an Other State; or Refuse to provide protection 2013 NAMIC Commercial Lines Seminar - Boggs Page 2 of 11
POTENTIAL EMPLOYEE OPTIONS Highest available benefits from one of four jurisdictions: 1. Benefits available from the employee s state of residence; 2. Benefits extended from the state in which they primarily work; 3. Benefits available in the state in which the injury occurred; or 4. Benefits prescribed by the state in which the employer's workers' compensation coverage is provided. WHICH STATE HAS JURISDICTION? One of two tests is applied to limit which jurisdiction s benefits apply: Significant Contact Test Contract of Hire Test 2013 NAMIC Commercial Lines Seminar - Boggs Page 3 of 11
SIGNIFICANT CONTACT TEST The Significant Contact Test is based on the employee. The state or states having the most contact with the employee are available options (and should be scheduled as a Primary state): The state in which the employee lives The state in which the employee works primarily The state in which the contract of hire was made CONTRACT OF HIRE TEST The Contract of Hire Test is based solely on the employment contract. The state of hire is the primary factor. Is the employment principally localized in this state? Is the employee working under a contract of hire made in this state for employment not principally localized in any state? Is the employee working under a contract of hire made in this state for employment principally localized in another state whose worker's compensation law is not applicable to the employer? Is the employee working under a contract of hire made in this state for employment outside the United States? 2013 NAMIC Commercial Lines Seminar - Boggs Page 4 of 11
RECIPROCITY & JURISDICTIONAL ISSUES RECIPROCITY & JURISDICTIONAL ISSUES State-to-state reciprocity problems limit or broaden the injured employee s jurisdictional options Three different levels of reciprocity: No reciprocity: Full reciprocity: Limited reciprocity: 2013 NAMIC Commercial Lines Seminar - Boggs Page 5 of 11
STATES THAT MUST BE 3.A. State of domicile and states with branch locations States with long-term, ongoing operations Monopolistic states Any state in which the employer must register or file with the state before beginning work Any state where a subcontractor is hired to perform work if no COI is provided (possible employee status) Any state with significant contact with the worker The contract of hire state Any state that does not reciprocate or has limited reciprocation States with no extraterritorial provisions STATES THAT SHOULD BE 3.A. States where any number of employees work for a long period. Any state where the employer has more than a one employee longer than 30 days The employer s state of incorporation 2013 NAMIC Commercial Lines Seminar - Boggs Page 6 of 11
UNDERWRITER PREROGATIVE & REQUIREMENTS IN 3.A. As underwriters you may not allow all of these states to be listed Primary states. If not, allow them to be listed under 3.C. If operations begin in an unlisted or 3.C. listed state during the policy period, underwriter must be notified. OTHER STATES LISTING Other States listing generally allows the insured to avoid the problems that arise from employees being able to choose the state from which benefits are desired Especially important if there is no or limited reciprocity When 3.C. is utilized correctly, the workers compensation policy responds as if the Other State was a listed 3.A. state, paying the necessary benefits Ideally, a 3.C. / Other State is one in which the insured does not have ongoing operations or employees at the beginning of the policy period 2013 NAMIC Commercial Lines Seminar - Boggs Page 7 of 11
STATES THAT MUST BE 3.C. Any state that qualified for 3.A. status, but you did not allow to be listed as such All bordering states States to which employees may regularly travel to attend classes, conventions or other meetings PREFERRED OTHER STATES WORDING All states, territories, and possessions other than listed 3.A. states and monopolistic states 2013 NAMIC Commercial Lines Seminar - Boggs Page 8 of 11
WHY YOU MAY REFUSE THE RECOMMENDED WORDING State in which you are not an admitted carrier this is a bogus reason You don t like the laws of a particular state You don t like the benefit levels required by a particular state You don t feel you are getting the adequate premium to cover the potential risk MINIMUM OTHER STATES CONSIDERATIONS Specifically scheduling those states that qualify for 3.A. status as per the assignment test but which you did not allow Specifically listing the bordering states and the other states recommended previously 2013 NAMIC Commercial Lines Seminar - Boggs Page 9 of 11
EXAMPLE OF BEST WORDING A North Carolina domiciled risk with employees occasionally working in surrounding states plus Maryland and New Jersey, and regularly attending seminars and training in Texas: "SC, Ga., Tn., Va., Md., NJ, Texas and all remaining states, territories, and possessions other than listed 3.A. states and monopolistic states." PENALTIES FOR NON-COMPLIANCE Failure to list a state as a Primary / 3.A. state: Failure to list a state as a secondary, Other / 3.C. state: 2013 NAMIC Commercial Lines Seminar - Boggs Page 10 of 11
MANAGING STATES WHERE YOU ARE NOT LICENSED Options for Primary ( 3.A. ) Status Options for Secondary ( 3.C. ) Status BOOKS PUBLISHED 2013 NAMIC Commercial Lines Seminar - Boggs Page 11 of 11