During a brisk morning in May of 2010 an employee of NGA Construction Company , Inc ; domiciled in New
Jersey fell from a scaffold suffering severe impact injuries, perishing soon afterward. If you have ever received a call like this as a business owner you never forget them. As an insurance broker and risk manager we have fielded too many of these calls through the years.
The above example offers a particular lesson for companies that hire subcontractors from out of state and companies from out of state that work in New York. Effective September 9th, 2007 the New York legislature amended the New York State Workers Compensation Law. The revision mandated that an employer must provide workers compensation insurance “through a policy issued in the laws of this state.” In July 2007 the N.Y. Workers Compensation Board issued a circular clarifying the requirement explaining that “all out of state employers with employees working in New York State will be required to carry a full New York State Statutory Workers Compensation policy” defining that as “one where N.Y. State is listed on item 3.A on the information page of the employers’ workers’ compensation insurance policy.”
The impact of not being listed in Part 3A of your workers compensation policy was acutely felt by M&L Enterprises , LLC the general contractor in the “Matter of Estate of Velasquez v NGA Constr. Co., Inc. (2013 NY Slip Op 0815). The courts affirmed a lower court decision that because NGA Construction Company, Inc a New Jersey domiciled construction company working in NY did not list NY as a 3A state on their workers compensation policy issued by New Jersey Casualty Insurance Company their claim was properly denied.
What’s the difference between listing NY as a 3A state or have them included under 3C “Other States” endorsement? Great question grasshopper! The section on your workers compensation policy called “other states” (3c) is for when your company or employees only work in another state very casually. For example there are sections of NY in Westchester County where as you drive through the county you can cross inadvertently into Connecticut then back into New York . King Street as an example which runs the border of Westchester & Fairfield Counties. If your employee is in an vehicle accident and is hurt in Ct, the other states endorsement would provide coverage. If you actually have a garage location in Ct better go 3A.
In the case of NGA Construction Company, they had field operations and were actually performing work in New York. Further this was not a one off job as they did many jobs in New York not just that one which precludes them from taking the position that the work was ancillary . By listing certain other states where you do perform work consistently under item 3A under your workers compensation policy you take the ambiguity completely out of play. In our estimation ambiguity equals liability.
The claim was eventually paid by the workers compensation insurance policy issued by Continental Indemnity Company , the carrier for M&L Enterprises, LLC. The financial impact of an increased experience modification factor and increased renewal premiums was felt by the general contractor whose insurance company paid the claim. NGA was also financially impacted as the loss was uncovered by their insurance leaving them attorney bills, breach of contract suit , e.t.c., e.t.c.
Bottom line was everyone lost here. What’s the key takeaway for you the reader? If your company is from out of state and you work in NY, make sure you contact your broker and ask for NY to be listed under 3A of your workers compensation policy, and NOT under 3c “Other States” which in NY does not get it done. The Velasquez claim happened to be a death claim. If Mr. Velasquez had lived and there was no workers comp available from a general contractor or building owner NGA would have been stuck with both the medical bills and the indemnity payments.
Just another reason why people hate insurance, and insurance companies. That said as in most things in life you really need to pay attention to the details. If you would prefer not too as it relates to insurance then you had better hire a Risk Advisor who will help you watch the shop.
For our free workers compensation coverage guide checklist click here. This important guide will ask important questions. You then confirm if the risk has been transferred to your workers comp policy or retained on your balance sheet.