On Foreign Ground: Insuring and Protecting Your Employees Abroad

By Rebecca A. Shafer – November 2009

Risk Management Magazine July/August 2009

With globalization and international trade increasing, more U.S.-based organizations are sending their employees to other countries on both short- and long-term assignments. For these employers, making sure their employees have appropriate workers compensation and liability insurance is as important as ensuring their physical security or that their vaccinations are up to date. Employers are responsible for their workers when they are injured anywhere in the world so sending anyone abroad without suitable insurance is a disaster waiting to happen.

Workers Compensation Concerns

Before any employee leaves the United States, make sure your domestic workers compensation carrier will extend coverage to every location that the employee is visiting. Usually employees need to be covered in all countries they are conducting business in, but the position on this issue will vary by carrier. For instance, coverage for an occurrence in Canada varies, and not all carriers provide coverage under a controlled master program. If you are aware of specific travel plans, you should report an estimated amount of payroll at policy inception. Make sure all subsidiaries, including those outside the United States, and employees from foreign operations that are working in the United States are covered as well. Consider placing those employees with a U.S. operation if they will be in the country longer than a few days so they will be covered under the U.S. workers compensation policies.

If your employees are working outside the United States for more than 30 days, they may be considered to be on permanent assignment, so check your policy closely. You may need an endorsement to cover those employees. The most efficient way to address this is to purchase a foreign voluntary workers compensation policy from a carrier that specializes in international insurance.

Foreign voluntary workers compensation is intended to provide coverage for staff traveling or permanently working overseas. Although these employees may be partially covered by domestic workers compensation coverages, they may not be covered in whole while serving in a foreign country. The international policy is usually primary and can provide 24-hour coverage when traveling overseas, be written to cover terrorism or war, and provide endemic-disease coverage, worldwide employer liability protection (with the exception of excluded countries) and repatriation expense.

All organizations with employees abroad should also have an international insurance policy that provides auto, bodily injury and property damage coverage in the foreign country. This plan will often provide extended workers compensation coverage for medical bills, emergency return to the United States and, in case of death, the return of the deceased.

Claims Issues

An employer should provide employees on temporary or permanent assignment with a letter detailing their assignment, location, wages and any additional allowances such as schooling for children or job placement for spouses. This information will be useful for the employee and the carrier if there is a loss, as this assists in determining the lost wages and other benefits to which one may be entitled.

Make sure adjusters know who to contact if there is a loss overseas. Claims-handling strategies may be different abroad, so the risk manager in the United States may want to be alerted about all overseas claims. Every step in handling foreign claims should be detailed in advance and noted in the insurer’s account-handling instructions.

Claims from abroad must be reported within 24 hours. The employer’s claims-handling procedure detailing what steps to take if an injury occurs may differ for overseas losses than for U.S.-based losses. Witness statements, supervisor statements and medical reports must all be obtained immediately. There may be variations in these forms for overseas injuries, so review these documents with that in mind. Both the employer and insurer should investigate claims when an injury or illness occurs and a claim is reported.

Make sure you get to the root of the problem. For example, an employee abroad went to the hospital reporting classic symptoms of sun exposure and was treated for dehydration, but a thorough investigation by the employer found that the employee had received multiple tick bites before seeking medical care. When he subsequently complained of fever and nausea, he was treated for Lyme disease, demonstrating that even a familiar disease can be misdiagnosed if it occurs in a venue unfamiliar with the condition.

When dealing with more exotic maladies in foreign lands, however, investigation can be more challenging. In another scenario, an employee contracted a disease while helping to build a school in Africa. Initially, the employee was diagnosed and treated for the wrong disease. Eventually, the correct diagnosis was found and the disease was cured. The suspected and the actual diseases were both considered endemic diseases-that is, they were specific to that particular region of the world. A domestic policy will offer coverage for occupational disease, but might not cover endemic disease. With foreign voluntary workers compensation coverage, which covers endemic disease, however, the insurer will pay the claim for lost wages and medical expenses until the individual is cured. Domestic workers compensation most likely would not have responded to such a claim.

Other scenarios can lead to more serious claims. For instance, suppose your employee is in Asia on a business trip and he falls asleep in a hotel room smoking a cigarette in bed. There are no sprinklers and several people die in an ensuing fire that guts the hotel. Your employee survives but is put on trial for both criminal and civil charges, sentenced to prison and ordered to pay a substantial fine.

If the employee is covered by an international general liability policy, any bail bonds, civil court costs and civil penalties can be paid under this coverage. Domestic CGL policies would not respond because of territorial limitations.

Protecting Employees

A safety evaluation will probably be necessary after any injury or disease outbreak. If the evaluation shows that remedial actions must be taken so that no further injuries occur, make sure that the recommendations are implemented. Keep in mind that since foreign medical care and return-to-work procedures may differ from their domestic counterparts, a specific plan may need to be developed for workers in other countries.

Emergency-evacuation plans must be posted in conspicuous locations in your facilities abroad and online. Mock evacuations should be held at least annually and phone service should be tested often to ensure it is reliable in case of a fire or other emergency. Wallet-size instruction cards with detailed emergency instructions should be provided to each supervisor and employee, and perhaps even family members. Reliable access to news and weather information is important to keep employees safe, especially if they travel to locations that are prone to volcanic, tsunami or hurricane activity. For example, when the employees of a major U.S. hotel chain traveled to Grand Cayman to assist in opening a new facility and training local personnel, several of the employees were injured during preparations for Hurricane Ivan.

In order to develop a plan that offers excellent medical care when employees are traveling or stationed overseas, work with a travel medicine company that will handle your employee’s medical needs and act as your organization’s medical representative in the other country. If you have a large project in a remote part of Brazil, for example, you will need contingency plans for air evacuation and local medical treatment. Your insurer may be able to help. International carriers can provide travel protection cards with specific instructions on who to contact in the event of a medical emergency. Additionally, you may need to hire an on-site doctor to ensure necessary triage and medical care.

In recent years, much attention has been given to the risks involved in sending American employees overseas to areas impacted by war. For instance, a number of U.S. security and construction companies have sent employees to Iraq to aid in rebuilding efforts since the fall of Saddam Hussein. In such situations, providing for pre-travel medical care, on-location medical providers, 24/7 medical advice and thorough claims investigations is key.

If your employees fall under the Defense Base Act (see sidebar below), your organization must purchase coverage. This foreign voluntary workers compensation policy has to be underwritten separately due to a different rating structure. If the risk is innocuous it can be included under a single policy with the balance of the foreign exposures, but often there are separate policies.

If your employees are venturing to hazardous regions such as parts of the Middle East, Africa and Mexico, you should also consider kidnap and ransom insurance. In Mexico, for example, the kidnapping of foreigners occurs at an alarming rate. So-called express kidnapping, attempts to get quick cash in exchange for the release of an individual, have occurred in almost every large city in Mexico and target not only the wealthy, but the middle class. U.S. businesses with offices in Mexico should contact the U.S. embassy or any U.S. consulate to discuss precautions they should take.

Kidnap and ransom insurance offers money for the ransom and protection of company personnel and property. Premiums vary based on exposure and can range from a few thousand to millions of dollars annually. This coverage can often be included in a package policy written in conjunction with foreign voluntary workers compensation.

So whether your organization has a handful of employees working abroad or a large overseas division, it is vital to be prepared for any contingency. American employers with workers traveling overseas can face coverage gaps and uncertain definitions in a standard workers compensation policy that may result in costly and lengthy coverage disputes. Moreover, employers cannot rely on workers compensation systems in countries where their workers are stationed since benefits vary from country to country. It is important to make sure that employees have as much coverage as possible-not only workers compensation, but liability and other insurance-when they leave American soil.

Rebecca A. Shafer, of Amaxx Risk Solutions, is an attorney and risk consultant specializing in workers compensation cost containment and litigation management. She thanks Jim Corej and Christine Miller-Duignan of Arthur J. Gallagher for their assistance with this article.