Workers' Compensation in Monopolistic States (OH, ND, WA, WY)
Navigating Workers' Comp in Monopolistic States: The Stop Gap Guide for Contractors
If your trade business operates in Ohio, North Dakota, Washington, or Wyoming, you are operating in what the insurance industry calls a "Monopolistic State."
In a monopolistic state, businesses are legally required to purchase Workers' Compensation insurance directly from a state-run fund. Private insurance companies are strictly prohibited from selling Workers' Comp policies in these four states.
While buying directly from the state might sound straightforward, it creates a massive compliance headache when you try to win commercial contracts, work with General Contractors, or join Managed Repair Programs (MRPs). Here is why your state-run policy isn't enough to get you on the job, and exactly how to fix it.
The Catch: Workers' Compensation vs. Employers' Liability
To understand why B2B partners reject state-run policies, you have to understand the difference between two critical types of coverage:
- Workers' Compensation: This focuses entirely on the employee. If your worker falls off a ladder, Workers' Comp pays for their medical bills and a portion of their lost wages.
- Employers' Liability: This focuses entirely on protecting the business. If that same employee decides to sue your company, claiming your negligence caused the fall, Employers' Liability covers your legal defense and settlement costs. Simply put: Employers' Liability kicks in exactly where Workers' Compensation stops.
The Trap: State-run Workers' Comp funds do not include Employers' Liability coverage. They only pay the injured worker's medical bills. They leave your business completely exposed to lawsuits.
Why B2B Partners Require Employers' Liability
When you try to win work with a property management firm, a commercial General Contractor, or a Managed Repair Network, they are heavily focused on risk mitigation.
If an injured worker sues your company, and you don't have Employers' Liability coverage to handle the lawsuit, that legal action can quickly travel up the chain to the GC or the property owner. Because state-run funds leave this massive legal loophole open, B2B networks will universally reject your state-issued Workers' Comp certificate unless you can prove you have supplemental coverage.
The Solution: What is Stop Gap Coverage?
If you operate in OH, ND, WA, or WY, you must acquire Stop Gap Coverage to meet B2B compliance standards.
As the name suggests, Stop Gap coverage bridges the gap left by the monopolistic state fund. It provides the crucial Employers' Liability protection your business needs to satisfy the requirements of networks and commercial partners.
How to get it: You do not usually buy a standalone Stop Gap policy. Instead, it is most often acquired as an endorsement (an add-on) to your existing Commercial General Liability (GL) policy. You simply need to contact the insurance agent or broker who handles your GL policy and ask them to add Stop Gap coverage for Employers' Liability in the specific amount required by your hiring partner (usually $1,000,000).
What does this mean for you?
Organizations that are participating in managed repair networks or B2B relationships with partners that require Employers' Liability will need to acquire Stop Gap coverage for Employers' Liability in the amount required by that managed repair program's requirements.