A commercial lines client based in Indiana has acquired several other companies over the years. At this point, the company has physical locations in eight states and at least five separate workers compensation policies. The agent does not handle the company's workers comp insurance but would like to advise it that it should purchase a single policy from a national carrier.

Q: How should the agent explain to the client that having multiple workers comp policies is problematic and could lead to problems down the road? 

Response 1: It's a legal question that involves the exact interconnection of these firms and their legal obligations to each other. You need the client's attorney's opinion from the get-go. Beyond that, since workers comp coverage is statutory, there's no particular coverage issue with having one policy or several. 

However, an issue might turn up with the employer's liability portion of the workers comp policy. If the company had one policy, it would have one limit. With multiple policies, it has multiple limits. If there's a claim that calls out that coverage for multiple entities, it would engage a higher total limit if there were multiple policies. On the other hand, if there's a high enough limit, including an umbrella or excess policy, that issue becomes meaningless. 

And, of course, there are the states that require special coverage, like Ohio. If your client is involved there, the answer must address the requirements of the monopolistic state.

Response 2: Are the entities combinable and would they benefit from that in terms of buying power and premium discounts? Or do they have distinctly separate operations and experience modification factors? 

Response 3: I wouldn't say it's “problematic." It's more inconvenient than anything. Many clients will have multiple policies, especially those with operations or employees in monopolistic states. 

The only problems I can see with multiple policies is more bills to pay and possibly keeping necessary endorsements coordinated on all policies. However, not every carrier is licensed in every state, so if the company prefers a particular carrier, it might not mind the added maintenance of separate policies.

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