13.4 Other States, USL&H, and Federal Acts

The Monopolistic vs. Competitive Split

Workers comp is bought in different markets depending on the state. A few states are monopolistic: coverage must be purchased from the state fund, and private insurers cannot write Part One there. Most states are competitive, allowing private carriers, state funds, or both.

Quick Answer: Memorize the monopolistic states — North Dakota, Ohio, Washington, and Wyoming. Employers in these states cannot buy Part One from a private insurer and must use the state fund; Employers Liability (Part Two) there is bought via a separate Stop Gap endorsement on the CGL or a separate policy.

Other States Insurance (Part Three)

Part Three — Other States Insurance extends Part One and Part Two to states listed in Item 3.C of the Information Page. It addresses the trap of an employer that begins operations in a new state mid-term.

• States already shown in Item 3.A must NOT also appear in 3.C.
• A monopolistic state cannot be covered under Part Three — coverage there must come from the state fund.
• If the entry reads "all states except those listed in 3.A and the monopolistic states," the policy automatically picks up incidental operations in a newly entered competitive state.

Failing to list a state where the employer has known operations leaves a gap; Part Three is meant for incidental or unexpected expansion, not planned operations the employer should have scheduled in 3.A.

USL&H and Maritime Endorsements

The Longshore and Harbor Workers Compensation Act (USL&H) is a federal no-fault act covering maritime workers (longshore, harbor, ship-repair) who are not seamen. It is NOT covered automatically by the standard policy; it requires the Longshore and Harbor Workers Compensation Act Coverage Endorsement (WC 00 01 06).

The Voluntary Compensation Endorsement lets an employer extend benefits to workers a statute does not require to be covered (e.g., farm labor in some states), paying them on the statutory schedule as if covered.

The Negligence-Based Federal Acts

Two federal systems are not no-fault — the worker must sue and prove employer negligence. These are the most tested distinctions:

Memory hook: the two transportation acts that move people and cargo across borders (railroads via FELA, ships' crews via the Jones Act) replace no-fault with a negligence lawsuit. USL&H and FECA stay no-fault. The type of worker, not the accident's location, determines which system applies.

Worked Coverage-Trigger Scenario

An employer headquartered in Texas (a competitive state) opens a new branch in Washington (monopolistic) and ships dockworkers to load vessels in a Louisiana port.

• Texas operations: standard policy Part One/Two, Texas listed in Item 3.A.
• Washington branch: monopolistic — the employer must buy Part One from the Washington state fund; the private policy cannot cover it under Part Three. A Stop Gap endorsement handles employers liability.
• Louisiana dockworkers: these are longshore workers under USL&H — the standard policy does NOT cover them automatically; the employer needs the WC 00 01 06 USL&H endorsement. If any worker is a vessel crew member (seaman), the Jones Act — a negligence regime — applies instead, not USL&H.

The trap: assuming one policy reaches every state and every maritime worker. It does not.

One more distinction worth memorizing: a state fund in a competitive state competes with private insurers and may also act as the residual market insurer of last resort. The NCCI assigned-risk plan places employers that private carriers reject; the premium there carries a surcharge (the ARAP, assigned risk adjustment program). A monopolistic state fund, by contrast, is the only seller — there is no private alternative and no assigned-risk plan because the fund must take everyone.

The "Other States" Coverage Problem

A WC policy lists covered states in Item 3.A (states where coverage is in force at inception) and Item 3.C - Other States (states where coverage extends if operations spread there). If an employer sends workers into a state listed in neither, there may be no coverage - a tested gap. Monopolistic states (where the state fund is the only insurer) cannot be added to 3.C and require a policy from the state fund.

Federal Workers Compensation Acts

Several federal acts cover workers outside ordinary state WC, and the exam expects you to match the worker to the act:

A subtle distinction: USL&H is a no-fault benefit system for shore-side maritime workers, while the Jones Act is a fault-based remedy for seamen who are crew of a vessel. The USL&H endorsement is added to the WC policy to cover those exposures.

Worked Example

A construction firm based in Idaho sends a crew to work temporarily in Washington, but Washington is not listed in Item 3.A or 3.C of its policy - and Washington is a monopolistic state fund jurisdiction. The crew's injuries there are not covered by the private policy; the employer needed coverage through Washington's state fund (L&I). Separately, a dockworker loading a ship is injured: the USL&H Act (added by endorsement) responds, not ordinary state WC. Matching the worker and location to the right act/state-fund is the central concept.