Foreign Workers Compensation Coverage

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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 on-the-job injuries while working in a foreign country.

Whether you need FVWC coverage depends on several factors. These include the types of workers you employ (U.S. citizens or foreign nationals), their travel destinations, and the length of time they spend outside the U.S.

Temporary Travel

Most state workers compensation laws provide coverage for temporary extraterritorial travel. This means that workers covered by the law are protected while traveling outside the state (or the U.S.) on a short-term basis. The time period for which workers are covered varies from state to state. One state might afford coverage for thirty days while another provides ninety 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 purchased a workers compensation policy that covers Jane and its other employees. Jane travels to Indonesia for a business meeting. During the meeting, she trips and falls on a carpet. Jane breaks her ankle and spends the next two days in a Jakarta hospital. She returns home several days later and hands her boss the hospital bill.

Jane's was out of her home state for only a week, and her injury was clearly employment-related. Thus, her medical expenses should be covered under Jones Consulting's workers compensation policy.

Risks of Foreign Travel

Overseas activities can lead to injuries that are not covered by a typical workers compensation policy.

First, some employees may remain abroad beyond the period provided by law for out-of-state travel.

Secondly, a worker may become infected with a disease (such as malaria) that is common locally but that is not covered under the workers compensation or occupational disease law in the worker's home state.

Thirdly, a worker may sustain an injury that the insurer deems not work-related. For instance, suppose that Jane's meeting in Jakarta has ended. She is scheduled to fly home the following day. She is walking to a restaurant to meet an Indonesian friend for dinner when she falls on the sidewalk. Jones Consulting's workers compensation insurer refuses to pay Jane's medical expenses. It argues that her injury did not arise out of her employment because it occurred when Jane was engaged in social activities unrelated to her job.

Fourthly, an employee may incur a serious injury or illness that requires immediate treatment in the worker's home state. The cost of evacuating an injured or sick worker back to his or her home state for emergency treatment can be very high.

Finally, an employer may need to hire workers 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 Coverage

If your firm employs workers who regularly travel outside the U.S. or if you employ workers in other countries, you should consider purchasing foreign voluntary workers compensation coverage. As its name suggests, FVWC is an insurance coverage that employers elect voluntarily. It is typically provided via a separate policy form or endorsement. It is similar to voluntary compensation coverage except that it applies specifically to workers traveling or working overseas.

FVWC insurance may cover any of the following three categories of workers:

U.S. Hires

These are U.S. employees hired in their home state. They may travel overseas on short-term business trips or work on an assignment in another country. In some policies, these workers are called "expats" or "U.S. Nationals." If a U.S. hire is injured while working outside the U.S., he or she typically receives the workers compensation benefits prescribed by 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 person hired in France for an assignment 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

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. Many countries have a compulsory workers compensation system similar to those in the U.S. Thus, local nationals are not afforded workers compensation coverage under a FVWC policy. These workers should be insured under a policy purchased locally.

Coverages Provided by FVWC Policies

FVWC policies include some unique coverages that aren't provided by state workers compensation laws:

Endemic Disease

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.

Repatriation

A worker who becomes sick or injured overseas may require immediate transport back to his or her home country for treatment. Repatriation covers the extra costs (over normal transportation costs) of returning the worker back home. This coverage may apply only to U.S. hires or it may apply to TCNs as well. It is often subject to a limit, such as $25,000.

24-Hour Coverage

For workers on temporary travel (business trips), FVWC coverage should apply 24 hours a day.  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 only to U.S. hires or to TCNs as well.

Employers Liability Coverage

The standard NCCI workers compensation policy includes employers liability coverage. This coverage 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. Because of these limitations, some lawsuits stemming from injuries sustained outside the U.S. may not be covered under employers liability coverage.

Fortunately, FVWC policies include employers liability insurance that applies to injuries sustained in foreign countries. This insurance protects employers against lawsuits filed by covered employees (including local nationals) who are injured while working overseas. It typically covers lawsuits filed outside the U.S.