13.4 Other States, USL&H, and Federal Acts

Part Three - Other States Insurance

Part Three (Other States Insurance) fills the gap when an employer begins operations in a state that is not listed in Item 3.A. but is listed in Item 3.C. of the Information Page. It treats that new state as though it had been a Part One state from the start.

Key rules:

• A state must be scheduled in Item 3.C. for Part Three to apply; some insureds list 'all states except those with monopolistic funds and the state of [home state].'
• Part Three responds only if the employer had no operations there at policy inception. If work was already going on in an unlisted state, there is a coverage gap and the policy should be endorsed.
• A state specifically excluded by being left off both 3.A. and 3.C. has no coverage - a classic exam trap when an employer expands without notifying the insurer.

A practical wrinkle: many policies schedule Item 3.C. as 'all states except those with monopolistic funds and the states named in 3.A.' This broad wording covers nearly any new expansion automatically, but it still excludes monopolistic-fund states, and it still does not retroactively cover a state where work had already begun. When an employee from a covered state is temporarily sent to work in another state, the home-state policy usually follows under extraterritorial and reciprocity rules; permanent operations in a new state, by contrast, demand that the state be scheduled.

Monopolistic-Fund States

A handful of states are monopolistic: workers' comp (Part One) can be purchased only from the state fund, not from a private insurer. The commonly tested monopolistic states are:

Memory hook: North Dakota, Ohio, Washington, Wyoming - 'NOWW.' A private WC policy's Part One and Part Three cannot cover these states.

Because private Part One is unavailable there, employers in monopolistic states still need Employers Liability for tort suits not handled by the state fund. They obtain it via the Stop-Gap Employers Liability endorsement, often added to a CGL or a separate policy. The state fund supplies the statutory benefits; the stop-gap fills the Part Two role.

The Voluntary Compensation Endorsement

Some workers are exempt from a state's compulsory workers compensation act — certain farm laborers, domestic, or casual employees — yet an employer may still want to provide statutory-style benefits. The Voluntary Compensation endorsement offers benefits as if the exempt worker were covered by the act, paid on a no-fault basis, in exchange for the worker releasing tort claims against the employer.

The exam contrasts this with Part Two (Employers Liability), which pays only when the employer is sued in tort for a work injury that falls outside the exclusive-remedy bar. Knowing that voluntary compensation fills the exempt-worker gap while employers liability backstops tort suits separates the two correctly.

Federal Acts: Maritime and Railroad Workers

Certain worker classes fall under federal law rather than state comp, and they split on whether they are no-fault or fault-based:

The core distinction: USL&H is no-fault and added by endorsement, while Jones Act and FELA are fault-based - those workers sue their employer for negligence and there is no automatic benefit schedule.

Other Federal Programs

Beyond maritime and rail, the exam expects awareness of:

• FECA (Federal Employees' Compensation Act) - covers federal civilian employees (postal workers, federal agency staff); administered by the U.S. Department of Labor, outside the private WC policy.
• Federal Black Lung / Federal Coal Mine Health and Safety Act - benefits for coal miners with pneumoconiosis.
• Defense Base Act - extends USL&H to civilian contractors working on U.S. military bases overseas.

The unifying theme: none of these are picked up automatically by the standard WC policy. Maritime exposure needs the USL&H endorsement (for covered longshore workers) or maritime/Jones Act coverage (for crew); the rest are separate federal systems an employer must address specifically.

How to Tell the Federal Acts Apart

Exam questions almost always test the boundary lines between these acts, so anchor on three sorting questions:

1. Is the worker a member of a vessel's crew? If yes, it is the Jones Act (fault-based, seamen sue). If a maritime worker is not crew but works on navigable waters or adjoining docks, it is USL&H (no-fault, endorsement).
2. Is it an interstate railroad worker? Then FELA (fault-based, negligence suit).
3. Is it a federal civilian employee? Then FECA, administered by the U.S. DOL, never under a private WC policy.

The single most-missed distinction is no-fault vs. fault: state comp and USL&H pay benefits automatically, while FELA and the Jones Act require the worker to prove employer negligence and let the worker sue for full tort damages (including pain and suffering). That larger, uncertain recovery is why crew and rail exposures are insured through liability-style endorsements rather than a fixed benefit schedule. A second trap is assuming an 'all other states' Item 3.C. schedule reaches monopolistic states - it never does.