The Effect of Employees Working from Home on Workers Compensation Coverage

The coronavirus pandemic has resulted in many more people working from their homes than ever before. To understand the effect of employees working from home on workers compensation coverage, we’ve presented the hypothetical scenario below and three ways coverage may or may not be applied:
Hypothetical Scenario
Employees work at ABC employee located in Indiana. Indiana is ABC’s only location. All employees are now working from home due to COVID-19. Many employees live in Kentucky and used to commute to Indiana to work each day. In our new reality, the employees never leave their home to work.  
Around 10am on Monday, March 30, 2020, one employee steps on his son’s Mattel Matchbox toy car while heading from the kitchen with coffee and slips. He fractures his elbow trying to break his fall, spills coffee on his arm, neck and face suffering second degree burns and has severe back pain. The employee files a claim in Kentucky because that is where he is getting treated, where he lives, where the accident happened, and the benefits are significantly better than in Indiana, including lifetime medical. Is the claim covered? It depends. 
How is Compensability Determined?
The jurisdiction (which is typically a state but there are Federal Acts as well) determines if the claim is compensable. The insurance policy does not determine what law applies at the time of injury.  The law determines what is payable.  The insurance policy determines who pays – the insured or the insurance company. The outcome turns on the way the workers compensation policy is written. Let’s assume in this hypothetical case, Kentucky law determines this is indeed a compensable injury under its workers compensation law. Does the insurance company provide coverage? Here are three different assumptions and how coverage would likely apply.

1. Indiana and Kentucky are Insured under 3.A.

The two items which reference how states are insured under a workers compensation policy are 3.A. and 3.C. You will find these references on the Information Page of the workers compensation policy – the first page of the policy. A sample “Information Page” from a workers compensation policy can be found here.
3.A. is simple. States where the employer operates at the inception of the policy should be listed in 3.A. It is clear from the restrictions under 3.C. that if work is taking place in a state when the policy goes into effect or renews, that state needs to be listed in Item 3.A. 
If both Indiana and Kentucky are listed in 3.A., the workers compensation policy would, in this scenario, respond to coverage with no issues. The employer had both states listed in 3.A. because its employees had a “substantial” relationship with both states – the employee worked in one state and lived in another state. An employee has selection of remedy in most, but not all, cases. Knowing the employee could select the benefits of either state whether the injury happened in Kentucky or Indiana, the prudent thing to do is have both states listed in 3.A.
 Action needed – None.

1. Indiana is insured under 3.A. and Kentucky is insured under 3.C.

The employer had Indiana placed in 3.A. as that is the location of the employer. In 3.C. the following wording was added: “All states, U.S. territories and possessions except Washington, Wyoming, North Dakota, Ohio, Puerto Rico and the U.S. Virgin Islands and states designated in Item 3.A. of this Information Page.”  Private workers compensation policies do not cover monopolistic states (e.g. North Dakota, Ohio etc.) because they can’t, only the state provides coverage in those jurisdictions; therefore, they are not included under 3.C. All other states including Kentucky are included for coverage.
States are listed in 3.C. when an employer expects it may have employees traveling to, or through, or working in during the policy period, but the work in those states will begin after the effective date or renewal date of the policy. If an employer begins work in any state listed in 3.C. after the effective date of the policy, all provisions of the policy typically apply as though the state were listed in 3.A. of the Information Page. 3.C. also requires notice to be given “at once” if work begins in any state listed in 3.C. although “at once” is not defined in the policy.  
Action needed - Employers who have states listed in 3.C. that are now activated by their employees working out of their homes should takes steps to add employees now working full time in those states. Employers should also pay close attention to the “at once” notification requirement in the policy.

1. Indiana is insured under 3.A. Kentucky is not Insured under the Policy

 It is not uncommon for an employer to only insure the state where operations are being conducted and forget about employees traveling to, through or living in other states. In this case, the carrier could deny the claim. The state of Kentucky, where the employee has selected benefits, is not insured under the policy. If one were able to convince the carrier to pay at least the Indiana benefits, the employer may be on the hook for the difference between Indiana and Kentucky benefits.
Action needed - All employers should check their workers compensation insurance policies and make sure all states employees are currently working in are insured under 3.A. 
 Dangerous Nuance of 3.C. Coverage – Beware!
If the employer has work on the effective date of the policy in any state listed in 3.C., coverage will not be afforded for that state unless the carrier is notified within 30 days.  
Insurance carriers will assign states where there is no known activity in 3.C. so they do not have to do a formal filing in the state. An insurance carrier must formally file any state listed in 3.A. This is time and money for the carrier. It is not uncommon to see 3.A. only for states with operations and 3.C. for all other states.
Assume the employer’s workers compensation policy renewed on March 15, 2020. Indiana is insured under 3.A. and Kentucky is insured under 3.C.  The employee has been working at home in Kentucky since February 27, 2020. So, the employee was already working in Kentucky when the policy renewed. The employer had until March 27, 2020 to notify the insurance company that employees were working in a state listed in 3.C. The injury happens on March 30, 2020.  The employer did not notify the insurance company that there are employees working in a state in 3.C. within the 30-day time period (probably because they didn’t know they needed to). It is likely that no coverage would be activated because of the lack of notification.
Action needed - An employer should check its workers compensation policy, especially recent renewals, and make sure any states in 3.C. where there are employees working are reported to the insurance carriers.
Summary
While one would like to think insurance carriers would not be sticklers on this issue during these uncertain times, it all depends on the size of the claim. This has been reinforced by the number of inquiries we receive weekly from across the country from attorneys and employers looking for assistance in obtaining coverage specific to this issue. These cases are hard fought, so take a moment to review workers compensation policies to ensure the coverage is properly written. Businesses are dealing with enough during COVID-19, they don’t need to add an uncovered work comp claim to their worries.
AssuredPartners has compiled a variety of resources related to the coronavirus.  Click here to visit the resource center or reach out to your AssuredPartners broker for more information.