How Other States’ Workers’ Compensation Laws Can Impact Your Business  

FEBRUARY 3, 2026

Most U.S. states require employers to carry workers’ compensation insurance — and impose strict penalties if they don’t. While employers might be aware of their home state’s workers’ compensation laws, many overlook the exposures created when employees are temporarily working outside of the state in which payroll is reported. If the employer or its insurance broker has not structured its workers’ compensation coverage correctly, these incidental “other state” exposures can lead to underinsured losses and potential legal consequences.

Penalties for Noncompliance With Worker’s Compensation Laws  

• Almost every state issues fines for employers that default on the obligation to provide workers’ compensation coverage. Imprisonment is possible in 23 states.
• Failure to insure is treated as a misdemeanor in most states, and employers may face significant fines and penalties.
• Employers that fail to provide coverage may be subject to “cease work” orders, become exposed to lawsuits by injured employees, and lose the right to standard common law defenses.
• Some state laws make defaulting employers liable for up to double benefits to injured employees.
• Corporate officers can be held personally liable in some states.

While workers’ compensation laws, insurance requirements, and benefits available vary by state, very few business owners are aware of how this can impact coverage. Workers’ compensation policies do not automatically extend coverage to other states, unless they are specifically requested by the employer (the insured) and listed on the policy’s information page. The workers’ compensation law of the state where an employee is injured determines what benefits are provided — not the policy.

Which States Should Be Listed on a Workers’ Compensation Policy’s Information Page?

• The state where the insured’s home office is located.
• States in which the insured’s branch offices are located.
• Any state where even one employee works on a regular basis.
• Insured’s state of incorporation.
• Any state where a subcontractor is hired to perform work if the subcontractor does not carry workers’ compensation insurance.
• Any state where the insured is required to register to conduct business.
• Any state where a contract of hire is made.

What Happens When an Employee Is Injured While Working in a State Not Listed on the Policy’s Information Page?  

The injured employee can choose to receive the workers’ compensation benefits available in that state, which could provide better coverage, leaving the employer to pay the difference in benefits. “Other States” insurance is meant to address exposures created by temporary, occasional work, or work-related travel.

Coverage Scenario #1:

A California-based company expanded its work into Arizona and Nevada. One of the company’s California employees was killed in an auto accident while working in Nevada. Since the company’s workers’ compensation policy didn’t include Nevada — and Nevada’s workers’ compensation statute allows the employee’s family to elect its death benefits — the company was responsible to pay the difference between the California and the Nevada death benefit, which amounted to $80,000.

If the company had been a client of USI Insurance Services, we would have recommended that it have both Arizona and Nevada listed for Other States coverage on its workers’ compensation policy information page.

Coverage Scenario #2

A Florida-based contractor won a bid to work on a project in Georgia. While the contractor carried a Florida workers’ compensation policy, it did not have Georgia added for Other States coverage.

Unfortunately, one of the contractor’s employees who resides in Florida was injured on the job in Georgia. While Florida allows up to 104 weeks of benefits for the injured employee’s temporary partial disability, because he was injured in Georgia, he could elect to collect benefits under Georgia’s workers’ compensation law, which allows up to 350 weeks of benefits for this type of disability.

Since Georgia was not listed on the contractor’s workers’ compensation policy, the contractor was forced to pay the difference between the Florida and Georgia benefits, which amounted to $121,000 over several years.

If this contractor had been a USI client, we would have recommended to include Georgia for Other States coverage to avoid this significant underinsured loss.