1. Coverage of Workers’ Compensation Claims
Claudio J. DiPaolo, Esquire
Christian M. Stein, Esquire

2. Types of Business Insurance
The Big Four
Commercial general liability (CGL)
Workers Compensation (WC)/Employers Liability (EL)
Property
Business auto insurance
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3. Workers’ Compensation/ Employers Liability (WC/EL)
Required if have employees
Possible to self insure
Criminal & Civil penalties for uninsured employers
EL is stop gap insurance: Coverage for injuries to employees at work which fall outside the workers’ compensation policy
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4. Workers’ compensation Coverage ANALYSIS
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5. NOTICE of claim
Purpose is to enable insurer to adequately investigate and respond to claims
Late notice does not relieve the insurer of its obligations unless the insurer is prejudiced as a result of the delay
Notice failures do not relieve Insurer from duty to defend unless prejudice results from the delay
In the workers’ compensation context notice is usually given with an incident/accident report or the receipt of a petition
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6. Date of LOSS/INJURY
Does the alleged injury incident date occur during policy term?
Did policy lapse due to non-payment ?
Does the alleged work incident occur on one specific date or is an continuing/repetitive trauma alleged?

7. Confirming Jurisdiction
Is the location or jurisdiction specifically excluded from the policy?
Has injury been accepted in another jurisdiction and Claimant seeks additional benefits
Is Jurisdiction asserted by Claimant proper Jurisdiction
Is it where the injury occurred ?
Is it where the Employer is located ?
Is it where Claimant resides?
Case example
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8. Exclusions Non bodily injuries
Intoxication (drugs or alcohol) directly causing the injury
Work injuries covered by Federal law
Intentional injuries caused by Insured Employer or co-employees
Insured’s violation of law
Employment law cause of actions
Insured’s statutory obligations
Damages precluded by the WC law
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9. States Covered Is the location of the injury covered or exempted?
Sections (Items) 3A and 3C of the Policy will control which jurisdictions the policy covers or exempts

10. STATES INCLUDED
If the location is not specifically included (Section 3A of the policy), did the Insured have separate coverage for that location
Is it included as a “catch-all” in Section 3C
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11. STATES NOT EXEMPTED
If state not exempted in Section 3C safety-net, then Insured must notify Insurer immediately when it begins work, or its employees begin working, in the non-exempted state. At very least, state potentially covered by 3C should be included in 3A at renewal.
If the injury location is not specifically covered in 3A, it is not sufficient to assume it will fall within Section 3C, INVESTIGATE FURTHER.
Section 3C is intended to provide coverage for injuries where the Insured’s contact with location is incidental, rather than established
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12. Section 3c
Does not include monopolistic state fund states (North Dakota, Ohio, Wyoming, and Washington) or territories (U.S. Virgin Islands and Puerto Rico – not “states”)
Section 3C covers incidental out of state exposures, including business travel, and to automatically pick up coverage for newly acquired locations and start-up operations that occur after the effective date of the policy.
Insureds are to notify the Carrier “at once” when work, which would ordinarily require Section 3A coverage, begins in a state not listed in 3A. Usually, this is within 30 days.
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13. Examples of injuries covered in states not exempted
Example 1: Insured employs long-haul drivers for deliveries. Previously, when delivering from Kansas to Arizona, drivers went through Colorado and New Mexico (states included in policy). Emergency road repair in Colorado requires the driver to take a different route, going through Utah (not included in 3A but not excluded in 3C). While in Utah on the detour, the driver is injured in an accident. Assuming the injury would ordinarily be compensable, the location would be covered under 3C.
Example 2: Insured is based in Raleigh, North Carolina (included in 3A). Insured’s employee travels to Portland, Oregon (not included in 3A but not excluded in 3C) for an annual conference for 3 days. While at the conference, the employee falls and injures herself. Assuming the injury would ordinarily be compensable, the location would be covered under 3C.
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14. INVESTIGATING NON-EXEMPT STATES
When an injury occurs in a potential Section 3C state, the examiner should investigate further.
When looking at the contact the Insured has with the state, look beyond the circumstances surrounding the injury and look at all (potential) contacts the Insured has with the state.
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15. EXAMPLE OF SECTION 3C INVESTIGATION
From Example 2, above:
During the examiner’s investigation, she learns the North Carolina Insured, a regional car parts retailer, opened a new location in Eugene, Oregon in the last 6 months in hopes of getting a new foothold in the western states. The employee, who was at the conference when she was injured, has travelled to the new location once a month for a week at a time, overseeing construction, staffing, and store-set-up.
When it renewed its policy 4 months ago, Insured did not inform Carrier that it had opened the new location because it was not entirely convinced the location would be sustainable. Insurer had previous locations in California and Arizona that failed.
Despite fact that employee’s contact with Oregon may be incidental at the time of her injury, Insured had sufficient contact/business in Oregon to require notice to Carrier. Injury may not be covered.
Why was the Insured’s activity in Oregon not reported?
Insured did not inform Carrier because would increase premium and did not want to incur additional costs until the location was viable (Premium Fraud)
Insured informed Broker, but broker did not think Insured was established enough to contact Carrier and wanted to save his client money. This may result in an Errors & Omissions claim against broker, but not coverage by Carrier.
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16. NOn-employees
Does (can) the policy or jurisdiction exclude certain classifications of employees?
Are officers of the corporation included or not?
Independent Contractors
Interns
Volunteers & Casual Employees
Under-age employees (minors)
Illegal/Undocumented aliens
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17. Best practices
Review the first report of injury (FROI) and petition carefully: Identifying Information – Names, Dates, Locations: Claim Information – Incident Details, Injuries, Disability
Consider language that negates coverage
Confirm or contradict the truth of the allegations
With Insured
Review Incident Report/Insured’s Accident Investigation
With other potential witnesses – police, emergency medical services, bystanders
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18. Beyond the coverage analysis
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19. Insured’s Duties Notifying the Insurer of injuries in a timely manner
Engage in Post-injury cooperation and communication to assist in the defense of the claim
Pay the premium
Comply with audits/ underwriting/ record keeping

20. Insurer's Duty to indemnify
Outlined in Policy
Benefits agreed or assessed by law or judicial determination
Statutory Interest
Costs
Expenses
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21. Insurer's Duty to defend
If the allegations of the claim against the Insured would be covered if proven by the indemnification clauses of the policy, duty to defend arises
If the claim only alleges that which would not be covered by the policy, there is no duty to defend
Generally includes the duty to defend both covered and non-covered claims
In most cases, Insurer more likely to indemnify if defending
Duty to defend allows control of defense
Duty to defend continues until litigation is concluded
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22. Duty to Defend VS. Duty to indemnify
Duty to defend is broader: Insurers have a duty to defend claims where the facts “potentially” state a claim within coverage of the policy
Facts which would result in a successful defense of the claim cannot be first used to avoid a duty to defend
Denial of claim ≠ denial of coverage
Example – defense to claim is that injured party was independent contractor; policy does not cover independent contractors – still must defend
Refusal to defend could result in bad faith claim

23. The Reservation of Rights
Protecting a potential denial of coverage while meeting obligations under the duty to defend
Depending on arrangement following reservation, Insurer may lose ability to control defense (e.g. Employer maintains separate counsel).

24. Estoppel
If employee classification or injury is covered, may be prevented from later denying such coverage
Not reserving rights may estop later denial of coverage
Be wary of what you say to Insured and Claimant
Investigate first
Can be bound by statements of Insured to Claimant – assert and maintain control of the situation

25. Check Endorsements
Employees typically excluded may be included in endorsements to the policy
Volunteers
Corporate Officers
Independent Contractors

26. Check if Employee Covered by Another Policy
Is Employee an employee of:
An insured sub contractor
A temporary agency who exerted control over the Employee

27. QUESTIONS?