New Jersey Case Tests Overseas Reach of Workers’ Comp Law

July 24, 2009

A New Jersey nonprofit that hires workers to teach in foreign countries is not required to provide workers’ compensation insurance for those employees, a New Jersey appeals court has ruled.

The decision — which reverses a ruling of a lower, trial court — appears to establish new limits on the reach of New Jersey workers’ compensation law. However, more legal wrangling is ahead as the courts must now decide on a case-by-case basis whether each workers should be covered.

The case centers on Princeton, New Jersey-based International Schools Services, Inc., a nonprofit that employs approximately 160 contracted teachers, all of whom are stationed overseas. None of the teachers are New Jersey citizens, although the program is administered from the group’s headquarters in New Jersey.

Prior to 2003, the nonprofit had no trouble obtaining coverage on a “state of hire” or “country of hire” terms. However, a string of claims led the nonprofit’s insurer to decline voluntary coverage for the overseas workers in certain countries.

In August 2003, the group sought coverage through the assigned market. The assigned carrier, Continental Casualty Insurance Co., declined to cover overseas workers, claiming it was only responsible for covering workers in New Jersey. Continental returned the portions of the premium keyed to those workers.

The standard New Jersey workers’ compensation policy contains an exclusion for work locations outside of the United States.

The Compensation Rating Insurance Board (CRIB), which oversees the assigned risk market in New Jersey, told the school that a court would need to decide whether the New Jersey Workers’ Compensation Act required carriers to provide the coverage for workers outside the country. The Department of Banking and Insurance (DOBI) did not respond to inquiries from the school, according to documents.

In 2006, the group sued three state agencies – the Department of Labor and Workforce Development, DOBI and CRIB – after it was unable to obtain workers’ compensation insurance for the workers through voluntary and assigned markets.

In 2008, the trial court found that New Jersey law required the school to provide the coverage for all employees. As it was still unable to obtain coverage, the school appealed.

In the decision to that appeal, the three-judge panel of the Appellate Division of the Superior Court of New Jersey ruled earlier this month that the trial court was wrong in its original decision. However, it also ruled there was insufficient evidence to establish concretely that overseas worker lacked sufficient contacts with New Jersey – such as a residence – that would normally require the worker to be covered.

The trial court must now go back and make that determination for each of those workers. The suit has been remanded to the lower court to establish one-by-one whether any of the employees in the suit have “sufficient contacts with New Jersey to support workers’ compensation claim(s)” – a legal standard for requiring the coverage in the Garden State.

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