Working Overseas Can Be Risky Business

Most probably, the named insured companys risk manager would have foreseen such a situation and arranged for liability insurance through the use of a policy issued by a German insurer, or through self-insurance or an umbrella policy, or even informing a claimant that a lawsuit needs to be filed in the coverage territory of the CGL form. But if, for some reason, the employer does not provide this protection, on what insurance protection can the employee rely?

The homeowners policy provides personal liability and medical payments to others coverages for the insured. So, if Mr. Schmidt injures someone in Germany while on his business trip, and his employer did not properly provide liability insurance coverage, can he rely on his homeowners policy for such coverage?

The answer is not comforting. The HO policy has a business exclusion to the effect that personal liability and medical payment coverages do not apply to bodily injury or property damage arising out of or in connection with a business engaged in by an insured. If Mr. Schmidt injures someone while engaged in his business pursuits, his HO policy will not provide insurance protection for him. (His non-business activities are protected, but not the business activities).

A true personal umbrella policy is supposed to provide coverage for situations excluded or not addressed by underlying forms. Unfortunately for Mr. Schmidt, the standard umbrella policy contains an exclusion for bodily injury or property damage arising out of or in connection with a business engaged in by an insured. So that coverage door is also closed to Mr. Schmidt.

Mr. Schmidt has similar problems with his auto exposures. He is an insured under his employers business auto policy while using an auto hired by the employer named insured. But the auto policy covers accidents and losses occurring within the coverage territory, defined on the policy as the United States, Puerto Rico and Canada–other countries, like Germany, are not included.

The same is true of the personal auto policy. Mr. Schmidt is an insured for the use of any auto, but the policy applies only in the United States, Puerto Rico or Canada. If he has an umbrella policy, that could provide coverage for him since the standard umbrella policys business exclusion does not apply to the use of an auto for business purposes.

Of course, he should be aware that some umbrella policies will not cover an overseas auto exposure unless personal auto insurance is first obtained for such a situation, and other umbrella policies do follow form with reference to coverage territory limitations.

Now, if Mr. Schmidt himself is injured on the job, what kind of insurance coverage can he expect?

Generally, employees who sustain work-related injuries while temporarily in foreign countries are protected by workers' compensation insurance as it applies in any given state. Now, it is not the language of the standard workers' comp policy that directly provides coverage; it is the state workers' comp statutes that dictate conditions under which benefits are provided. And although the state laws vary, their extraterritorial features generally give an employee the right to those benefits that apply in his or her state of hire, regardless of where the injury might be sustained.

Employers and employees should know that some states specify that, for workers' comp to apply, operations in a foreign country must be on a temporary basis (without defining the word "temporary"). Other statutes specifically dictate the maximum period allowable for such foreign exposures.

Of course, most foreign assignments are not long enough to violate the terms of the state laws, but it pays to be familiar with the provisions in the event delay or other problems require an employee to remain in overseas for a period longer than anticipated.

Mr. Schmidt also has some insurance benefits available to him under the employers' liability insurance part of the workers' comp policy. This coverage is conditional upon certain criteria.

First, Mr. Schmidt must have been working overseas on a temporary basis, and the work must be necessary or incidental to the employers business operations as designated on the information page of the workers' comp policy. Second, the injury sustained by Mr. Schmidt must have arisen out of and in the course of his employment. Finally, any lawsuit filed by Mr. Schmidt must be instituted within the United States, its territories or possessions, or Canada.

In sum, Mr. Schmidt should know that his work overseas can be riskier than first thought. To provide peace of mind, questions about insurance protection for both his liability exposures and for his own injuries should be fully answered prior to leaving the United States.

David D. Thamann is associate editor

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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