Foreign Workers Compensation Coverage
Companies that employ workers who travel outside the United States on business may need foreign voluntary workers compensation (FVWC) coverage. This coverage pays benefits to workers who suffer occupational injuries while working in a foreign country.
Should your company purchase FVWC coverage? The answer depends on the types of workers you employ (whether they are U.S. citizens or foreign nationals), their travel destinations, and the length of time they spend outside the U.S.
Most state workers compensation laws provide short-term coverage for workers engaged in extraterritorial travel. That is, workers are covered while traveling outside the state (including outside the U.S.) on a temporary basis. The coverage period for extraterritorial travel varies from state to state. One state might afford coverage for 30 days while another provides 90 days. Here is an example of an injury that would likely be covered as extraterritorial travel.
Jane works as a consultant for Jones Consulting, a management consulting firm based in the U.S. As required by state law, Jones has protected its employees from on-the-job injuries by purchasing a workers compensation policy.
Jane travels to Indonesia for a three-day business meeting with a client. She is walking to a conference room in the client's office when she trips and falls on some loose carpet. Jane breaks her ankle and spends the next two days in a Jakarta hospital. When she returns home several days later, she hands her boss the hospital bill. Jane was out of her home state for less than a week. As her injury was clearly employment-related, it should be compensable under her state's workers compensation law.
When her boss submits the hospital bill to Jones Consulting's workers compensation insurer, the insurer should pay the claim.
When Injuries Aren't Covered
Overseas activities can lead to injuries that aren't covered by a typical workers compensation policy. Here are some reasons why injuries that occur outside the U.S. might not be covered:
- Exceeded Time Restrictions. The employee's injury may have occurred after the time period provided for extraterritorial travel. For example, suppose a worker's injury occurred when she had been outside her home state for 120 days. If employee's state of residence provides only 90 days' coverage for travel outside the state, the injury will not be covered.
- Disease Not Covered. A worker may become infected with a disease that is common in a foreign country but is not covered under the workers compensation or occupational disease law in the worker's home state. An example is malaria.
- Non-Occupational Injury. A worker may sustain an injury that the insurer (and the law) deems non-work-related. For instance, suppose that Jane has completed her business with her client. She is scheduled to fly home from Jakarta the following day. She is walking to a restaurant to meet a friend for dinner when she falls on the sidewalk. Jane suffers a broken arm and is treated at a local hospital. Jones Consulting's workers compensation insurer refuses to pay the bill from the Jakarta hospital. It contends that Jane's injury is not compensable under the state's workers compensation law because it did not arise out of her employment. The injury occurred when Jane was engaged in social activities unrelated to her job.
- Evacuation Expenses. An employee may incur a serious injury or illness that requires him or her to be evacuated to the worker's home state for treatment. Emergency transportation costs may not be covered by state workers compensation laws. These costs can be significant.
- Not a U.S. Hire. A worker may have been hired in a country other than the United States. State workers compensation laws do not provide benefits to workers hired in other countries.
Foreign Voluntary Workers Compensation Policy
You should consider purchasing a FVWC policy if you employ U.S. workers who regularly travel outside the country. You should also consider this coverage if you employ workers in foreign countries. In many respects, a FVWC policy resembles voluntary compensation coverage except that it applies specifically to workers traveling or working overseas.
Like the standard NCCI workers compensation policy, a FVWC policy includes both workers compensation and employers liability coverages. It may cover any (or all) of the following three categories of workers:
These are U.S. employees hired in their home state. They may travel overseas on short-term business trips or work in another country for an extended period. Policies may refer to U.S. hires as "expats," "U.S. Nationals," or some other term. If a U.S. hire is injured while working outside the U.S., he or she typically receives the workers compensation benefits prescribed by law in the employee's state of hire. For example, a worker hired in Pennsylvania will receive the benefits afforded by Pennsylvania law.
Third Country Nationals (TCNs)
This group consists of workers, other than U.S. hires, who are assigned to work in a country other than their country of hire. An example is a French national hired in France to work in Spain. TCNs are usually provided the benefits afforded by the country in which they were hired. An employee hired in France for an assignment in Spain will receive benefits provided by French law.
Local nationals are workers hired in their home country and assigned there when that country is other than the U.S. An example is a Mexican national hired to work in Mexico. Like states in the U.S., many countries have a compulsory workers compensation law. Consequently, local nationals should be insured under a policy purchased in their home country. For this reason, most FVWC policies do not extend workers compensation coverage to local nationals. Many do, however, include these workers under employers liability coverage
Coverages Provided by FVWC Policies
FVWC policies include some unique coverages that aren't provided by state workers compensation laws.
An endemic disease is a disease that is common in a certain country or location but is not typically found in the worker's home state. An example is leptospirosis, a bacterial disease common in Indonesia. If Jane contracted leptospirosis during her business trip and incurred medical expenses for treatment, those expenses would be covered under her employer's FVWC insurance.
A worker who becomes sick or injured overseas may need to be transported immediately back to his or her home country for treatment. Repatriation covers the extra costs (over normal transportation costs) of returning the worker back home. Some policies provide this coverage to U.S. hires only. Others extend it to TCNs as well. Repatriation coverage is often subject to a limit, such as $25,000.
For workers on temporary travel (business trips), FVWC coverage should apply 24 hours a day. When coverage applies on a 24-hour basis, any injury a worker sustains during a business trip will be deemed work-related. If Jane's employer had purchased FVWC insurance with 24-hour coverage, the injury she sustained outside the restaurant would have been covered. Round-the-clock coverage may apply to U.S. hires only or to both U.S. hires and TCNs.
Employers Liability Coverage
Part Two, Employers Liability, of the standard NCCI policy excludes injuries sustained outside the U.S. or Canada. An exception applies to injuries sustained by citizens or residents of the U.S. or Canada that are temporarily outside those places. The word temporarily is not defined. Lawsuits are covered only if they are brought in the U.S. Thus, some lawsuits stemming from injuries sustained outside the U.S. may not be covered under Part Two of a U.S. workers compensation policy.
Fortunately, employers liability insurance is included in a FVWC policy. It protects employers against lawsuits filed by covered employees (including local nationals) who are injured while working overseas. It typically covers lawsuits filed inside or outside the U.S.