When it comes to workers' compensation insurance, most states are competitive, meaning they allow employers to purchase coverage from private insurance carriers. However, North Dakota, Ohio, Washington, and Wyoming are monopolistic states for workers compensation, which means that the state government is the sole provider of this insurance.
Employers doing business in these states must secure workers' compensation coverage directly from the state fund:
If you're considering sending employees into a monopolistic state, you’ll need to realize that your usual process of extending coverage won't apply. Typically, in competitive states, adding another state to your policy is as simple as contacting your national carrier and requesting an endorsement. However, national carriers can’t provide coverage in monopolistic states. We wish we could, but there aren’t any exceptions to the rule.
When expanding into a monopolistic state, you'll need to secure workers' compensation directly from the state-operated fund, which means setting up a new policy specific to that state.
Review section 3A of your current workers' compensation policy. This section lists the states where your insurance applies. If you're working across state lines, each state where your employees operate must be listed on your policy. If you're venturing into a monopolistic state, you'll need to obtain separate coverage from the state's fund.
In most states, workers' compensation policies provided by private insurers often include employer liability insurance as Part II of a workers’ comp policy. This coverage protects your business against lawsuits by employees for work-related injuries or illnesses.
However, in monopolistic states, the state-operated funds typically do not provide employer liability insurance as part of their workers' compensation coverage. This means that when you secure workers' compensation from these state funds, you'll need to separately obtain "stop gap" coverage through a private insurer.
This additional policy serves to cover the liability risks that the state fund does not, ensuring comprehensive protection for your business against potential claims.
When planning to work in a monopolistic state, proactive planning is key. Here are some steps to take:
If you're navigating the complexities of multi-state operations, our team is here to help ensure you have the right coverage in place for every other state where you do business. Fill out our instant quote form today, and let our team provide you with the expert guidance and tailored insurance solutions you need.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.