How Multi-State Workers Comp Exposures Can Create Serious E&O Risk

• June 22, 2026

By Karen Thurlow

Errors & omissions exposures remain a persistent concern for insurance agents and brokers, particularly when placing workers compensation coverage.

Placing workers comp coverage without fully understanding a client’s operations is a bit like drawing a map with missing borders—you may think you know where the lines are, but the moment someone crosses them, everything changes. For insurance agents and brokers, those “borders” are often state lines, and overlooking them can turn an otherwise routine placement into a serious E&O exposure.

Workers comp is governed by each state’s regulations, and even occasional or incidental work across state lines can create coverage gaps if coverage isn’t structured properly. In an increasingly mobile workforce, where employees regularly travel or work remotely, it is a risk for agencies to assume operations are confined to one jurisdiction.

One of the most common pitfalls in workers comp placement is failing to properly address multi-state operations. Clients may be headquartered in one state but have employees working, traveling or temporarily assigned elsewhere. Agents should go beyond the client’s primary location and ask detailed questions about:

• Where employees physically perform work.
• Out-of-state travel or job sites.
• Remote or hybrid work arrangements.
• Expansion plans into new states.

Workers comp policies must be structured to reflect these exposures accurately, including the correct states in Item 3.A. Covered States and 3.C. Other States Coverage, where applicable.

Agents sometimes assume that other states coverage is automatically included or that it will respond to all incidental exposures. However, this is not always the case. Some states—such as monopolistic states, where employers are required by law to purchase workers comp coverage from a state-run fund rather than a private insurer—require separate policies, and certain endorsements or restrictions may limit coverage.

Therefore, agents must always review the policy form and endorsements carefully. If there is any ambiguity, confirm with the carrier and document the file.

Clear documentation is one of the strongest defenses against E&O claims. When discussing workers comp coverage:

• Confirm exposures and state operations in writing.
• Provide explanations of coverage limitations.
• Document any client decisions to decline recommended coverage.
• If a client chooses not to add other states coverage or fails to disclose out-of-state operations, your documentation can be critical.

Further, businesses’ risk profiles evolve as their operations evolve. Make it a standard practice to revisit workers comp exposures at each renewal. Ask targeted questions about new contracts or job locations, changes in workforce or operations, and use of subcontractors or leased employees. This proactive approach helps ensure coverage keeps pace with the client’s operations.

Here’s a scenario: An insurance agency placed a workers comp policy for a construction company headquartered in Indiana. During the application process, the client indicated that its operations were primarily within Indiana. The policy was issued listing Indiana in Item 3.A., and no other states were included in Item 3.C.

Several months into the policy period, one of the company’s employees was injured while working on a job site in Kentucky. When the claim was submitted, it was denied because the policy did not include Kentucky exposure, nor did it provide other states coverage that could respond.

As a result, the employer faced a significant uninsured workers comp claim, including medical expenses and lost wages. The client subsequently filed an E&O claim against the insurance agency, alleging that the agent failed to properly advise on multi-state exposures and neglected to include appropriate coverage in other states.

The agency’s defense was weakened by limited documentation of discussions regarding out-of-state work. There was also a suggestion that the producer was made aware of work in other states in a social situation. Ultimately, the claim resulted in a costly settlement.

This scenario underscores several important lessons:

• Always ask about out-of-state exposures, even if they seem incidental.
• Ensure policies include appropriate coverage in other states, when needed.
• Clearly document all client interactions and coverage decisions.
• Review and update exposures regularly.

Workers comp may seem straightforward, but the details matter. By taking a disciplined, consultative approach, agents and brokers can significantly reduce their E&O exposure while delivering better protection for their clients.

Karen Thurlow is an attorney with 20 years of experience handling professional liability claims and leader of the US Agents claims team for Swiss Re Corporate Solutions.

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor should it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders. Copyright 2026 Swiss Re.