13.4 Other States, USL&H, and Federal Acts

Part Three — Other States Insurance

A WC policy's Part One covers only states listed in Item 3.A of the Information Page. If an employer expands into a new state not listed, there is a coverage gap. Part Three — Other States Insurance closes this gap for states shown in Item 3.C. The exam tests this contrast directly:

• Item 3.A — states where coverage applies as primary from inception.
• Item 3.C — "other states" where coverage applies if work begins there during the policy period.

Trap: A state listed in Item 3.A cannot also be listed in Item 3.C, and a monopolistic state fund state cannot be listed in Item 3.C either. If an employer begins operations in a state that is neither in 3.A nor 3.C, there is no coverage there.

Monopolistic vs. Competitive State Funds

Some states require coverage to be bought from a state-run fund and bar private insurers — these are monopolistic fund states (historically Ohio, North Dakota, Washington, and Wyoming). Key consequences:

• You cannot insure a monopolistic state through Part One or Part Three of the standard NCCI policy.
• Because the monopolistic fund typically does not provide employers liability, employers buy Stop Gap coverage (often endorsed onto a CGL or as a WC endorsement) to fill the Part Two gap.

Competitive state funds (e.g., California's State Fund) compete with private carriers, so private coverage is available there.

Because a monopolistic fund usually provides only the statutory (Part One) benefits and no employers liability, the employer is left exposed to third-party-over and consortium suits. Stop Gap coverage fills exactly that hole. Watch for an exam answer that says a Stop Gap employer is fully covered for Part One in the monopolistic state — it is not; Part One there comes only from the state fund, and Stop Gap addresses the Part Two gap.

Assigned-Risk Plans (Residual Market)

An employer with poor loss history or an unusual operation may be unable to buy coverage in the voluntary market. Because coverage is mandatory, every state provides a residual market — an assigned-risk plan (or a state-administered pool) that guarantees the employer can obtain a policy, typically at higher rates.

The exam phrasing is consistent: an employer rejected by the voluntary market obtains coverage through the assigned-risk plan, and a servicing carrier is assigned to write and service the policy. This is the workers compensation parallel to the FAIR Plan in property or the automobile assigned-risk plan, and the correct answer to "where does an uninsurable employer get coverage" is almost always the assigned-risk/residual-market plan.

USL&H and Maritime/Federal Acts

State WC laws do not cover certain federally regulated workers. These are heavily tested:

The Key Distinction — Crew vs. Not Crew

The most common exam trap is distinguishing USL&H from the Jones Act:

• A longshoreman loading a ship at the dock is not a crew member -> USL&H (no-fault benefits).
• A deckhand/seaman who is a member of the crew -> Jones Act (must prove employer negligence — it is a fault-based remedy, like FELA for railroads).

Note that FELA and the Jones Act are fault-based — the injured worker must prove the employer was negligent, unlike no-fault state WC. This is the opposite of the AOE/COE no-fault rule learned in 13.1, and the exam exploits the contrast.

Federal civilian employees are covered under the Federal Employees Compensation Act (FECA), administered separately and not written on the commercial WC policy.

Jurisdiction and Extraterritorial Coverage

A related tested issue is which state's law applies when work crosses borders. States use rules of jurisdiction and extraterritorial reach: a worker hired in one state but injured in another may be entitled to choose between benefit systems, and reciprocity agreements let a covered out-of-state worker remain under the home-state policy temporarily.

The producer's job is to ensure every state of operation appears in Item 3.A or 3.C so a cross-border injury is never uninsured. When in doubt, listing a state in Item 3.A is safer than relying on Part Three, because Part Three only triggers if operations begin in that state during the term and the state is eligible to appear in 3.C.

Synthesis: Multi-State and Federal Coordination

For a multi-state employer, confirm each operating state appears in Part One or Part Three before a loss; an unlisted, non-monopolistic state otherwise has no coverage, and monopolistic-fund states can never be added to Part Three. For maritime and federal exposures, the decisive question is crew vs. not-crew: a vessel crew member recovers a negligence remedy under the Jones Act, while a shoreside longshore/harbor worker recovers no-fault benefits under USL&H.