Out-of-State Workers’ Compensation Injuries: NC Jurisdiction and Insurance Coverage Implications
In nearly all instances, when a worker is injured on the job in North Carolina, the North Carolina Industrial Commission has jurisdiction over the claim. One notable exception involves out-of-state employers who do not regularly employ three or more employees in North Carolina or voluntarily purchase North Carolina workers’ compensation coverage.
So, what happens when a worker is injured in another state and asserts a claim for benefits in North Carolina? Does the North Carolina Industrial Commission have jurisdiction over that claim? If North Carolina does have jurisdiction, what are the coverage implications under a workers’ compensation insurance policy?
Under the N.C. Workers’ Compensation Act, pursuant to N.C.G.S. 97-36, the North Carolina Industrial Commission has jurisdiction over claims for injuries occurring outside the state of North Carolina under three circumstances:
- The contract of employment was made in North Carolina;
- The employer’s principal place of business is in North Carolina; or
- The injured workers principal place of employment is within North Carolina.
Contract of Employment
With regard to the contract of employment, North Carolina follows the “last act” test. More specifically, the Industrial Commission and the courts look at where the last act necessary for formation of the contract occurred to determine the state where the contract was formed.
If the last act occurred in North Carolina, then the North Carolina Industrial Commission has jurisdiction over the claim. These last acts can include taking a drug test, accepting an offer of employment over the telephone in North Carolina, or a requirement that the employee begins the work in North Carolina. A contract’s modification can sometimes confer or even remove jurisdiction. As is often the case, these claims are very fact specific, and must be carefully analyzed at the outset of the claim.
Employer’s Principal Place of Business
With regard to where an employer’s principal place of business is located, there are constitutional requirements for the Industrial Commission to be able to exercise jurisdiction over an employer, inasmuch as the Commission must first have personal jurisdiction over the employer by having sufficient minimum contacts in North Carolina to meet constitutional due process requirements. If those initial due process requirements are met, then the Commission and the courts will look at factors, such as where the employer is headquartered, to determine where the employer’s principal business is located.
Employer’s Principal Place of Employment
The employee’s principal place of employment is often at issue in claims where the employee works in the trucking, transportation or delivery business. In those instances, an employee will often work in multiple states. As is the case with issues regarding the contract of employment, the determination of the employee’s principal place of employment is exceedingly fact-driven. For example, in Davis v. Great Coastal Express, 169 N.C. App. 607, 610 S.E. 2nd 276 (2005), it was found that the Industrial Commission lacked jurisdiction where a truck driver was injured, hired, paid, and made the majority of his deliveries in Virginia. On the other hand, in Perkins v. Arkansas Trucking Services, Inc., 134 N.C. App. 490, 518 S.E. 2nd 36 (1999), the Court found that the Industrial Commission did have jurisdiction over an out-of-state corporation where the employee’s residence was in North Carolina, and where he conducted aspects of his business in North Carolina, including receipt of assignments, storage and maintenance of the truck, and receipt of paychecks. Also, the employee made 18 to 20% of his pickup stops in North Carolina. Again, close analysis of each claim’s facts is crucial in determining the location of the injured employee’s principal place of employment.
Workers’ Compensation Insurance Coverage
The Act is clear that if an injured worker recovers benefits under the laws of another state’s workers compensation system, the carrier in North Carolina is entitled to a credit for any benefits received from that other state, up to the limits of the Act.
Since a North Carolina employer can face liability for a workers’ compensation claim in multiple states, how can that employer adequately protect itself from a potential multistate claim? Also, what coverage defenses in North Carolina are potentially available to a carrier?
The North Carolina Workers’ Compensation Policy and Information Page include the following language:
Other States Insurance: Part Three of the policy applies to the states, if any, listed here:
OTHER STATES INSURANCE
A. How This Insurance Applies
- This other states’ insurance applies only if one or more states are shown in Item 3.C. of the Information Page.
- If you begin work in any one of those states after the effective date of this policy and are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed in Item 3.A. of the Information Page.
- We will reimburse you for the benefits required by the workers compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them.
- If you have work on the effective date of this policy in any state not listed in Item 3.A. of the Information Page, coverage will not be afforded for that state unless we are notified within thirty days.
Tell us at once if you begin work in any state listed in Item 3.C. of the Information Page.
The language in the above-listed standard North Carolina workers’ compensation policy is clear that an employer must designate which state’s workers compensation law is going to apply to the policy and, additionally, what “other States” will apply, noting that “other state’s insurance” will likely only apply if the “other state” is listed in item 3.C. Obviously, if an employer knows it is conducting business in multiple states, it should list those states in 3.C. However, issues can nonetheless arise where a claim is made in a state not listed in 3.C. and whether the carrier can therefore effectively deny coverage for that claim. To resolve those issues, general principles of contract law provide that the clear and unambiguous terms of a policy are to be applied and enforced as written in the policy. Also, any ambiguity is construed against the drafter of the contract which, in these cases, is almost always the carrier who drafted the policy language.
In a case successfully handled by Teague Campbell, the North Carolina Court of Appeals addressed the interpretation of this policy language in Harrison v. Tobacco Transport, Inc., 139 N.C. App. 561, 533 S.E. 2nd 871, petition for discr. rev. den’d, 353 N.C. 263, 546 S.E. 2d 96 (2000), which involved a trucker who was hired, worked, resided and was injured in North Carolina. The employer’s policy only contained 3.A. coverage for Kentucky, and no states were listed in 3.C. As one would expect, the carrier denied coverage on the ground that the policy did not provide coverage for employees working in North Carolina. However, the employer contended that the policy was ambiguous and, therefore, unenforceable. On appeal, the Court agreed with the Commission and carrier, and found the policy language to be unambiguous. In reviewing the North Carolina standard policy provisions (listed above), the Court stated, “… the language unambiguously requires that [the employer] must have worked in North Carolina on the effective date of the policy, and that it have notified [the carrier] of such work within 30 days of that date period.” Since there was no evidence that the employer notified the carrier within 30 days of the effective date of the policy that it was working in Kentucky, there was no coverage provided to the employer under 3.C.
What Should Employers and Carriers Do?
Given the Act’s jurisdictional provisions and the enforceability of the standard workers’ compensation policy language in North Carolina, an employer is well-advised to carefully monitor those states in which its employees are working and, if necessary, abide by the notice requirements of the policy by adding any such states to its workers compensation policies. Not only is this important in the context of the location of the employee’s principal place of employment, but a contract of employment can be made in North Carolina simply with a telephone call, which can unwittingly confer North Carolina’s jurisdiction on that employer, thereby subjecting it to exposure.
Carriers, as well, need to be aware of the law in North Carolina as to jurisdiction and the interpretation and enforcement of workers’ compensation policy provisions in these multistate claims, in the event coverage defenses are available.