That caution came during a recent continuing education session held at the Professional Insurance Agents of New York annual MertoRAP conference. Conducting a session titled, "Workers' Compensation, Crossing State Lines," Ivan Cohen of Insurance Education Corp. of Carmel, N.Y., advised agents that they are wrong to assume workers' compensation coverage in one state will cover workers filing claims in a different state.

State laws and carrier contracts can limit or sometimes prohibit workers' compensation payments in a state outside of where the policy is written, he noted. For clients with employees working in multiple states, an agent who believes that a single policy will cover all workers' compensation claims can be in for a rude awakening and face personal liability when there is an out-of-state claim.

In some cases, states may not allow non-domiciled insurers to cover claims; in other cases, the insurer may not extend coverage outside of the state the policy is written in, he said.

Determining Factors
The need to purchase insurance in another state occurs where the company has established fixed outside locations for employees. When this is the case, the agent will have to determine if the policy extends to other states or if separate coverage needs to be purchased for employees in that out-of-state location.

Cohen emphasized that an agent cannot simply assume the coverage automatically extends to other states. He stressed that it is not the policyholder or the carrier who determines where a claim is filed, but the employee. "The employee controls where they want to put the claim," he said.

New York, he said, "will respond 100 percent" to claims from injured employees of businesses in other jurisdictions.

He noted that there are four states where workers' compensation can only be purchased through the state's program: North Dakota, Ohio, Washington, and Wyoming. An employer with a location in those states must be aware that he needs to procure insurance through those funds to cover workers there.

This concern also relates to liability coverage, especially a third party claim. If the proper coverage is not in place an agent could find himself liable for the claim, Cohen advised.

"Make sure you have all your ducks lined up in monopolistic states," he said.

Premium Audits Also a Concern
Another issue agents need to consider is premium audits for their multi-state locations. All states do not calculate payroll for premium at the same rate. What may be one price in New York could be much higher in Connecticut, he pointed out, meaning the client could pay more premium.

Before quoting a price, he said, "check rates before you open your mouth, and let [your client] know what is going on."

Where there is a claim dispute over multiple jurisdictions, the case law sides with the employee, he said, advising agents that they can't assume they're going to win.

Finally, on the issue of errors and omissions exposure, agents have to make sure they keep in constant contact with their clients with emphasis that they need to advise the agent of any changes.

As in any E&O issue, documentation is key, and on every renewal, agents must send letters telling clients they need to keep the agency properly informed of changes that can affect their workers' compensation insurance.

"If they fail to inform you, then you have an excellent defense," he observed.