Potential Complications With Workers' Compensation Insurance For Multistate Businesses
Posted on: 8 March 2016
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Are you planning to expand your business to other states? If your answer is yes, then you should be prepared for the potential complications you may experience with your workers' compensation insurance. Here are three examples of these issues:
Where to Buy From
Both state agencies and private insurance agencies sell workers' compensation insurance. State laws determine where businesses can purchase their insurance. For example, if your business is located in Ohio or North Dakota, you must purchase your insurance from the state-operated fund.
As you can see, this brings a complication if you bought workers' compensation insurance from a private insurer, and you now wish to expand into a state such as North Dakota. It means your existing insurer cannot cover your employees in the new state, and you will have to buy additional coverage for your new business arm.
Different Premium Rates
Premium rates also differ because there are different rules for their calculation. In most states, the degree of hazards your employees face is an essential factor in calculating the premiums. For example, roofing is generally more hazardous than working in a bookstore. Therefore, you are likely to pay higher premiums if you are in the roofing industry than if you sell books. However, states may give different weights to the degree of danger faced by employees. This means one state may consider roofing as much more dangerous than selling books, while another one may consider the former just a little bit more dangerous than the latter.
The limits of compensations that insurers have to pay injured employees also differ by state. For example, a lost arm in Nevada is compensated for a maximum of $859,634 while the state of Iowa caps the compensation at $361,750. As you would expect, the maximum compensation also influences the premium rates.
Considering all these factors, even if you are engaged in similar business in two states, you may end up paying different premiums for their respective workers' compensation insurance.
Prerogative on Where to File a Claim
Finally, you may also have a problem if one of your employees gets injured and needs to file a claim. The issue here is that it isn't your prerogative to decide where the injured employee ought to file a claim. It may be up to state laws or the employee to decide where to file the claim. For example, if the employee is injured in New York State, then state law demand that they have to file their claim in the same state. This may deny you the chance to have the claim settled by the insurer that is least likely to raise your rates.
As usual with legal issues, you need to preempt these complications before they occur. Engage the services of a lawyer experienced in workers' compensation to help you meet your legal obligations without exposing your business to too much risk. Remember that workers' compensation insurance is usually a requirement; you can't shirk it.