Monopolistic Worker's Compensation States: The Basics

Overview

    Four States and two territories in the United States employ a unique worker’s compensation model known as a Monopolistic State Fund (the “Fund”). For employers doing business in North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U. S. Virgin Islands there are a unique set of rules regarding worker’s compensation coverage. It is not only important to understand the Monopolistic State Fund policies and procedures for each individual state the employer is doing business in, it is also imperative to let your Agent know if your business employs workers in any of these states to be sure proper coverage is in place.

Understanding the Fund

    The Fund is a government owned and operated fund set up to provide mandatory insurance service. In states that employ the Fund, employers must purchase their worker’s compensation coverage from the state fund, thus excluding private companies from competing for business. Worker’s compensation is handled by the state or a state sponsored agency and some of the state agencies are also responsible for handling the disputes thereof.

Employers Liability

    Employers Liability provides additional coverage for claims if an employer is held liable because their act endangered the safety of their employees. This coverage pays for related expenses and damages when an employer is sued for an employment related illness or injury, including third party claims. Typically, Employers Liability is included as Part 2 of a Worker’s Compensation Policy; however, states that employ the Fund lack employer’s liability coverage in their policies and must be obtained separately.
    When a business is domiciled in a non-Fund operated state BUT has employees in a Fund operated state, a Stop Gap Endorsement will provide Employers Liability Coverage in a Fund state. If a business is domiciled in a Fund operated state, a Stop Gap Endorsement may be added to the General Liability policy.

Alternatives to the Fund

    In Ohio and Washington, employers have the additional option of self-insuring their workers comp claims. Employers must receive permission from the State in order to self-insure and the employer itself must weigh the benefits vs. the drawbacks of such a plan. The advantages for choosing a self-insurance option include: lower overall cost, cash flow, direct input into who handles the claims, input into how claims are administered, the ability to design the structure of the program, and the ability to design safety and loss control programs; however, self-insurance also has its drawbacks, being: potential for unusual costs, requirements to post collateral with the State’s regulatory authorities, and devotion of management to the oversight of the self-insurance plan.
It is important to note that there are additional states, that do not operate on a Fund based system, but DO have specific worker’s compensation requirements; therefore, it is imperative to contact your Agent when doing business in any state other than the state of domicile.

For More Information

For more information regarding the individual state and/or territory and the policies regarding the Fund, see the associated websites:

• North Dakota www.workforcesafety.com/
• Ohio www.ohiobwc.com
• Washington www.LNI.WA.gov
• Wyoming www.wyomingworkforce.org