Is a State-Specific Workers' Compensation Policy Enough?
Employers typically understand the requirements necessary to comply with the workers’ compensation acts in the state or states in which they have physical locations. Many also understand the unique requirements when they operate in multiple states. For example, a contractor domiciled in Pennsylvania that does work in New York for more than 30 days, even nonconsecutively, must purchase a New York State workers’ compensation policy in addition to the Pennsylvania one. But few realize that there are other workers’ compensation acts that are not state specific to which they may be subject.
One in particular is complying with the little-known Longshore and Harbor Workers’ Compensation Act (LHWCA), which is a federal mandate. LHWCA applies to companies and employees working on or over navigable waters in or adjacent to the United States.
LHWCA defines employers needing this coverage as:
The term "employer" means an employer any of whose employees are employed in maritime employment, in whole or in part, upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining are customarily used by an employer in loading, unloading, repairing, or building a vessel).1
Unlike the state workers’ compensation acts, which are controlled by state rules, United States Longshoremen and Harbor Workers Insurance (USL&H) is regulated and controlled by the U.S. Department of Labor. USL&H claims can have higher benefits for injured workers, as well as harsher penalties, and legal issues for non-compliance.
Even if a contractor does business in a landlocked state, it may need to comply with the LHWCA and have USL&H Insurance. If the company is located in Pittsburgh and works along the Ohio River or has workers doing construction on the docks of Newark, New Jersey, it needs USL&H coverage in addition to Pennsylvania and New Jersey policies. If the contractor is working on a bridge over the Schuylkill River in central Pennsylvania, it needs USL&H coverage. The Schuylkill River is a tributary of the Delaware River which is considered navigable water. A company with a Pennsylvania Workers’ Compensation policy working on a pier in Philadelphia may also need a USL&H endorsement to be adequately covered and comply with the federal statute.
For example, a Pennsylvania-based heavy road construction equipment company sent several employees to the port of Newark to put tires on equipment being offloaded from container ships coming from Europe. This company managed a sophisticated, multi-state operation, yet was unfamiliar with the Longshore and Harbor Workers’ Compensation Act. Fortunately, the contractor was easily able to add a USL&H endorsement to the policy. Had he moved forward without that endorsement and an employee was injured, the company risked uncovered benefit costs, fines, penalties and litigation. Additionally, since the policy was state specific, the company’s insurance carrier would have denied benefits since the injury occurred under the jurisdiction of the LHWCA.
It is recommended that contractors work with an agent with expertise in workers’ compensation and risk management to ensure their exposure is eliminated and their employees are properly protected.