I got an interesting call the other day from an insurance agent, who was trying to figure out how to help a client cover occasional Workers Compensation insurance exposures in other states. The client was based in Colorado, insured by Pinnacol Assurance.
Now, normally the way to handle occasional exposures in other states is to add them to the policy under Section 3C. But the agent said that he had gotten some written advice from Pinnacol indicating they couldn't do this.
Then it dawned on me: Pinnacol isn't a regular insurance company. It's the former Colorado State Fund, transmogrified into the form of an insurance company. But because of that, Pinnacol isn't approved to write Workers Compensation insurance in states other than Colorado.
It's not a problem limited to Pinnacol. Not all insurance companies are licensed to write Workers Compensation in all states. And there are also the group self-insurance trusts that operate in many states. Many employers have difficulty differentiating between such programs and an insurance policy (they are often marketed in ways that may obscure the important technical differences.)
In the case of the Colorado company that prompted the phone call, it appears their options are to purchase a non-Colorado policy for their incidental out of state exposures, or to replace the Pinnacol policy with a policy from a multi-state insurer who would be able to add other states to a single policy.
Employers need to keep an eye on their incidental out of state exposures, as it can lead to uninsured claims if one isn't careful.
I worked on another recent case where a Louisiana employer had coverage through a group self insurance trust that covered only Louisiana. When they took a new job in Texas, they ended up with an uninsured claim because they lacked Texas coverage.
Keeping an eye on what states are covered by your policy is an important detail that sometimes gets overlooked, especially by smaller employers. Since Workers Compensation liability is mainly a state-by-state matter, having coverage in one state does not help if you have workers who are eligible to make a claim under the laws of a different state.