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One Company, 5 Workers Comp Policies: Is This a Problem?

A company has physical locations in eight states and at least five separate workers compensation policies. What issues will having these multiple policies create?
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one company, 5 workers comp policies: is this a problem?

A commercial lines client based in Indiana has acquired several other companies over the years. At this point, the company has physical locations in eight states and at least five separate workers compensation policies. The agent does not handle the company's workers comp insurance but would like to advise it that it should purchase a single policy from a national carrier.

Q: How should the agent explain to the client that having multiple workers comp policies is problematic and could lead to problems down the road? 

Response 1: It's a legal question that involves the exact interconnection of these firms and their legal obligations to each other. You need the client's attorney's opinion from the get-go. Beyond that, since workers comp coverage is statutory, there's no particular coverage issue with having one policy or several. 

However, an issue might turn up with the employer's liability portion of the workers comp policy. If the company had one policy, it would have one limit. With multiple policies, it has multiple limits. If there's a claim that calls out that coverage for multiple entities, it would engage a higher total limit if there were multiple policies. On the other hand, if there's a high enough limit, including an umbrella or excess policy, that issue becomes meaningless. 

And, of course, there are the states that require special coverage, like Ohio. If your client is involved there, the answer must address the requirements of the monopolistic state.

Response 2: Are the entities combinable and would they benefit from that in terms of buying power and premium discounts? Or do they have distinctly separate operations and experience modification factors? 

Response 3: I wouldn't say it's “problematic." It's more inconvenient than anything. Many clients will have multiple policies, especially those with operations or employees in monopolistic states. 

The only problems I can see with multiple policies is more bills to pay and possibly keeping necessary endorsements coordinated on all policies. However, not every carrier is licensed in every state, so if the company prefers a particular carrier, it might not mind the added maintenance of separate policies.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.

Thursday, November 30, 2023
Workers Comp
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