Morrison Trucking, Inc., the employer, appeals the compensation judge’s finding that it was uninsured for the purpose of payment of Minnesota workers’ compensation benefits due the employee, and the judge’s order that the employer reimburse and pay a penalty to the Special Compensation Fund.  We reverse and vacate.

Morrison Trucking, Inc., has been owned and operated by Thomas Morrison since 1995.  In 1997, Morrison Trucking moved from Red Wing, Minnesota, to Hager City, Wisconsin.  From 1995 through 2001, the employer, through the Lawrence-Bahmbach Agency, obtained workers’ compensation insurance through the voluntary insurance market.

In 2001, the employer was unable to obtain coverage through the voluntary market and, through the Lawrence-Bahmbach Agency, applied for workers’ compensation insurance through the Wisconsin Worker’s Compensation Insurance Pool (Pool).  Included with the employer’s application to the Pool was a form entitled “Supplementary ‘Wisconsin Limited Other States Coverage’ - Request.”  (Morrison Ex. 1.)  The Pool is administered by the Wisconsin Compensation Rating Bureau (WCRB).  On September 21, 2001, the WCRB issued to the employer a Workers Compensation Insurance Pool binder which stated, in part, “Your workers’ compensation insurance coverage is being afforded by the Pool effective 12:01 A.M. on 9/15/01.”  The binder stated Travelers Insurance Company was assigned to service the employer’s workers’ compensation insurance.  Finally, the binder stated, “Please retain this binder as evidence of the coverage until you receive your policy.”  (Morrison Ex. 2.)

On December 20, 2001, Travelers issued a Workers Compensation and Employers Liability Policy to the employer for the policy period September 15, 2001, through September 15, 2002.  (Morrison Ex. 3.)  Part One of the policy describes the workers’ compensation insurance provided.  Paragraph 3.A. of the Information Page, summarizing the coverage provided, states Part One of the policy applies to workers compensation insurance in the state of Wisconsin (WI).  Part Two of the policy covers the employer’s liability insurance.  Part Three of the Traveler’s policy is entitled “Other States Insurance” and provides:

The Travelers policy states Other States Insurance applies only if one or more states are listed in Item 3.C. of the Information Page.  No state is shown in Item 3.C. so Other States Insurance coverage was not afforded.  The employer did not, however, request or require Other States Insurance.  As explained in Part Three A.2. of the policy, such coverage is necessary only if the insured had “work” in another state.  While the word  “work” is not defined in the policy, the employer did not have operations in any state but Wisconsin.  The employer did, however, have employees who, as long-distance truckers, were temporarily in other states.  The employer, therefore, applied to the Pool for Wisconsin Limited Other States Insurance.  Travelers provided this coverage by endorsement.  The policy, however, excluded such coverage in Minnesota.  At issue in this case is the validity of that policy exclusion.

Generally, drivers for the employer initiated a trip from the employer’s terminal in Hager City, Wisconsin, where the trucks were located.  The majority of the drivers’ loads were picked up in Northfield, Minnesota, and were usually delivered in Salt Lake City, Utah.  On the return trip, the driver would deliver salt to southern Minnesota locations and then return the truck to the Hager City, Wisconsin terminal.  On July 31, 2002, Bryan Martin, the employee, was delivering salt to a Culligan store in Winona, Minnesota, when he was injured.  The employee’s injury was reported to Travelers.  The company processed the claim and paid benefits to the employee under Wisconsin worker’s compensation law.  Thereafter, the employee filed a claim in Minnesota seeking benefits under the Minnesota act.  Travelers denied liability contending the employer had no coverage and was uninsured for workers’ compensation benefits in Minnesota.  Under Minnesota law, the Special Compensation Fund then became liable for the benefits due the employee.

The Special Compensation Fund (Fund) then brought a claim against the employer seeking reimbursement for any benefits owed the employee and seeking a penalty under Minn. Stat. § 176.183, plus costs.  The employer moved to join Travelers as a party to the proceeding.  Ultimately, the employee, the employer, Travelers, and the Fund entered into a settlement whereby the Fund paid $67,500.00 to the employee in settlement of his claims under the Minnesota Workers’ Compensation Act.  The parties’ remaining claims were tried before a compensation judge.  In a Findings and Order, the compensation judge found the employer was uninsured for Minnesota workers’ compensation benefits on July 31, 2002.  The compensation judge found the reasonable expectations doctrine did not invalidate the exclusion of Minnesota contained in the insurance policy issued by Travelers.  Accordingly, the compensation judge found the Special Compensation Fund was entitled to reimbursement from the employer in the amount of $67,500.00, and found the employer owed the fund a penalty of $43,875.00 plus costs.  The employer appeals.

On appeal, the employer contends the purported Minnesota coverage exclusion in the Wisconsin Limited Other States Insurance Endorsement of the Travelers policy is not valid.  The appellant asserts Morrison Trucking had no operations in the state of Minnesota and did not require a separate insurance policy in Minnesota.  The appellant argues that it reasonably expected Travelers to provide full coverage for all of its employees regardless of their residence or place of injury and this reasonable expectation was not met.  The denial of coverage, the appellant asserts, was based on an ambiguous, obscure, and arbitrary policy exclusion which should not be enforced.  Finally, the appellant contends it properly applied for coverage from the Pool, including an application for Wisconsin Limited Other States Coverage.  The appellant contends the Pool contractually agreed to provide this coverage for the employer when it issued the insurance binder.  The appellant asserts Travelers cannot thereafter limit the extent or nature of the insurance which the Pool and Travelers contractually agreed to provide.  For these reasons, the appellant asserts the compensation judge’s decision should be reversed.  The Fund joins in the arguments of the employer.

Travelers contends the doctrine of reasonable expectations is not applicable in this case because Thomas Morrison admits he did not read the insurance policy when he received it.  Further, the respondent contends there is nothing hidden or ambiguous about the exclusion because it is clearly set forth on the declarations page referencing the endorsement and the endorsement listing Minnesota as an excluded state for purposes of Other States Coverage.  Because Bryan Martin was a Minnesota resident, Travelers contends the employer was obligated to obtain separate coverage for him in Minnesota.  Therefore, Travelers contends the decision of the compensation judge should be affirmed.

All states in the United States require that workers compensation liability be secured.  9 A. and L.K. Larson, Workers’ Compensation Law § 150.01.  In Wisconsin, insurance coverage for Wisconsin employers is mandated by Wis. Stats. § 102.28(2)(a).  For those employers unable to obtain coverage in the voluntary market (or unable to self-insure), Wisconsin has established an assigned risk plan called the Wisconsin Worker’s Compensation Insurance Pool.  The Pool is a mandatory risk sharing plan for worker’s compensation insurance under Wis. Stats. § 619.01(6).  The Wisconsin Compensation Rating Bureau, the WCRB, administers the Pool.  The Pool consists of six servicing carriers that are insurance companies licensed to do business in Wisconsin.  Each servicing carrier receives assignments from the WCRB, on a rotating basis, to issue worker’s compensation insurance policies and provide specified insurance services to eligible employers.  In consideration for such services, a servicing carrier receives a percentage of the billed premium.  Travelers Insurance Company was a servicing carrier for the Pool.

Each servicing carrier participating in the Pool must sign a Servicing Carrier Agreement.^[2]  Under the terms of the agreement, a servicing carrier is deemed to be an independent contractor of the Pool whose rights and obligations are contractually established.  The agreement preambles state the purposes of the Wisconsin Pool.  Three of the preambles provide:

Incorporated by reference in the Servicing Carrier Agreement is a document entitled “Rules Governing The Insuring Of Risks As Required By Section 615.01 Wis. Stats.”^[3]  The Rules provide, in part:

 Traveler’s Exhibit 1, entitled “Wisconsin Worker’s Compensation Insurance Pool, Information and Procedures,” (the Handbook) is a document prepared by the WCRB.  The Handbook outlines performance standards for servicing carriers, which Travelers was in this case.  In the underwriting and audit section, the Handbook provides:

The Servicing Agreement, the Rules, and the Handbook establish the procedures for insuring employers through the Pool.  The first quoted preamble to the Agreement explains that the Pool is required by Wisconsin law to provide worker’s compensation coverage to any employer unable to obtain coverage in the voluntary market.  Rule II provides that any risk of an employer will be insured through the Pool.  The Handbook states coverage will be bound by the Pool the day following receipt of the application from the employer.  In this case, the employer submitted an application for insurance to the Pool.  The employer’s application included a request for Wisconsin’s Limited Other States Insurance Coverage.  The Pool did what it was required to do under Wisconsin Law and bound coverage by issuing an insurance binder to the employer.  By the issuance of a binder, the Pool contractually agreed the employer would be provided a policy of insurance.

The second quoted preamble to the Agreement provides that a servicing carrier agrees to provide insurance coverage and services to a qualified employer on behalf of the Pool.  Rule III requires the servicing carrier to issue a policy of insurance to the applicant upon receipt from the Pool of the insurance binder.  The Handbook requires the servicing carrier to issue an insurance policy, including requested endorsements within 30 days of receipt of the premium and completed application.^[4]  If there is a question of the employer’s eligibility for coverage, the servicing carrier is instructed to contact the Pool.  There is no evidence Travelers contacted the Pool concerning the employer’s eligibility for Wisconsin Limited Other States Coverage.  Under the terms of the Agreement, a servicing carrier is a subcontractor of the Pool.  Travelers, under the terms of the Agreement, was contractually bound to issue a policy to the employer, including the requested endorsement.  Travelers had no legal or contractual basis to refuse to insure the employer or to limit the risk it would insure.  The insurance binder issued by the WCRB is a contract that provides that Travelers would provide worker’s compensation coverage to the employer for all its employees.  Under the terms of the Agreement, Travelers was contractually obligated to insure the employer and all of the employer’s risks.

Travelers does not dispute that it provided a worker’s compensation insurance policy to the employer and that it owed Wisconsin worker’s compensation benefits to the employee as a result of his July 31, 2002, injury.  Neither does it dispute that it provided Wisconsin Limited Other States Coverage.  Travelers does contend, however, that it properly excluded Minnesota from the Limited Other States Insurance Endorsement, and asserts it cannot be liable for Minnesota benefits.  Travelers cites the deposition testimony of Ralph Herrmann, who stated “the assigned risk pool is not authorized to write business outside of the State of Wisconsin, so we are - - we are not permitted to issue a policy covering exposure in another state.”  (Travelers Ex. 4 at p. 21.)  Accordingly, Travelers argues its contractual obligation is limited to payment of Wisconsin benefits, and it has no obligation for the additional Minnesota benefits paid the employee by the Fund.  We do not agree.

Most job-related injuries occur in the state where the employee was hired, regularly works and resides.  Many businesses, however, are not solely intrastate operations.  Some businesses, while principally based in one state, have “operations” in another state, such as a branch office.  In such a case, that employer would be obligated by the law of that other state to obtain workers’ compensation coverage which satisfies the laws of that state.  That interstate employer would then have two options: the employer could request its insurer to add the other state to the employer’s existing policy or the employer could obtain a separate insurance policy in the other state.  According to Mr. Herrmann, the Pool would not be permitted to provide a policy that met the requirements of the law of another state.

Other interstate businesses maintain a single location, but their employees travel to different states.  Morrison Trucking, Inc., is such a business.  Its sole terminal or base of operations is in Wisconsin, but its truck drivers travel through many states.  If one of the employer’s drivers is injured outside of Wisconsin, that employee may be entitled to assert a claim in more than one state: in Wisconsin, in the state of injury, or in the employee’s state of residence.^[5]  The employer requested the Wisconsin Limited States Other Insurance Endorsement to insure itself against exactly this risk.  The Wisconsin Limited Other States Insurance Endorsement “is intended to provide limited, temporary coverage for Wisconsin employers for injury to any employee who regularly works in Wisconsin, but just happens to be in another state at the time the injury occurs, and elects coverage in that state.”  (Travelers Ex. 1 at p. 29.)  The coverage provided by the Wisconsin Limited States Insurance Endorsement is not, however, direct coverage, and does not satisfy an employer’s obligation under the law of any state other than Wisconsin.  Rather, the coverage reimburses the employer for any additional benefits the employer may owe under that other state’s workers’ compensation law.  This coverage, the Pool can and does provide.  Had Minnesota not been excluded from the Wisconsin Limited Other States Coverage, Mr. Herrmann testified the policy would have required Travelers to reimburse the employer for the benefits to which the employee was entitled in Minnesota.  (Travelers Ex. 4 at p. 32-33.)

The Handbook contains two paragraphs addressing insurance for an employer for injuries governed by the law of a state other than Wisconsin, which state:

The employer’s application to the Pool for insurance included a “Supplementary ‘Wisconsin Limited Other States Coverage’ - Request.”  The request form asked whether the applicant had any permanent business locations outside the state of Wisconsin, to which the employer checked NO.  The request form asked whether all of the applicant’s employees were residents of the state of Wisconsin, to which the employer checked NO.  If NO, the applicant was asked to list the employees’ names and state of residence.  The appellant listed eight employees who resided in Minnesota.  Finally, the request asked whether any employees, at any time, worked outside of Wisconsin.  The employer wrote “Truck Drivers, 95 % of a total time worked is spent outside WI.”  (Morrison Ex. 1.)

Carrie Sorenson was an account manager underwriter for Travelers and dealt exclusively in the involuntary market.  Upon receipt of the binder from the Pool, Ms. Sorenson reviewed the binder letter and the employer’s application for coverage and issued the policy of insurance.  The policy contained a Wisconsin Limited Other States Insurance Endorsement.  Minnesota was, however, excluded from the coverage provided by the endorsement.  Ms. Sorenson testified she excluded Minnesota from the Endorsement because she assumed the employer had operations in Minnesota.  Ms. Sorenson testified, “because he [Mr. Morrison] did list the state in which they [certain employees] resided and 95% of the time they are outside the state of Wisconsin, so that said to me that he had Minnesota operations, exclude Minnesota.”  (T. at 99.)^[5]  Ms. Sorenson further testified there was no reduction in premium because of the exclusion of Minnesota from the Wisconsin Limited Other States Coverage.

Travelers’ denial of Minnesota coverage under the Wisconsin Limited Other States Coverage was based on Ms. Sorenson’s assumption that Morrison Trucking had business operations in Minnesota.  We find no evidence in this case that the employer had any business operations in Minnesota.  While neither the Manual, the Handbook, or the Travelers policy define the term “operations,” in Minnesota a “Terminal or Base of Operations” is defined as “[a] permanent location owned, leased, or used by the trucker at which loading, unloading, and other related non-clerical work functions such as maintenance and transfers are performed and from which the driver/employee physically reports to work on a regular basis.”  Minnesota Basic Manual for Workers’ Compensation and Employers Liability Insurance, at <http://www.mwcia.org/Downloads/Manuals/2006_Basic_Manual.pdf> in Part Two-Classifications, p. C113.  Morrison Trucking’s only terminal or base of operations was in Wisconsin.  Thus, the reason for Traveler’s exclusion of Minnesota from the Wisconsin Limited Other States Coverage was incorrect.

The Pool bound coverage for the employer and Travelers was contractually obligated to insure the employer.  The Handbook states Wisconsin Limited Other States Coverage will not apply in any state where the employer had operations which should be covered by a workers’ compensation insurance policy in that state.  We find no other legal or contractual basis in the Agreement, the Manual or the Handbook to limit the Wisconsin Limited Other States Coverage.  The employer had no operations in any state but Wisconsin.  Accordingly, we find no legal or contractual reason for Travelers to unilaterally limit the risk it would insure.

When construing the coverage provided by an insurance policy, both Minnesota and Wisconsin courts apply the reasonable expectations doctrine.  Columbia Heights Motors v. Allstate Ins. Co., 275 N.W.2d 32 (Minn. 1979); Gross v. Lloyds of London Ins. Co., 121 Wis.2d 78, 358 N.W.2d 266 (1984).  The reasonable expectations doctrine states that “the objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.”  Atwater Creamery Co. v. Western Nat’l Mut. Ins. Co., 366 N.W.2d 271, 277 (Minn. 1985) (quoting Keeton, Insurance Law Rights at Variance with Policy Provision, 83 Harv. L. Rev. 961, 967 (1970)).  The Wisconsin Supreme Court cited the identical language from Keeton in Hardal v. American Farmers Mut. Cas. Co., 255 N.W.2d 903, 908 (Wis. 1977).  In the Atwater decision, the court went on to state the reasonable expectations doctrine “gives to the court a standard by which to construe insurance contracts without having to rely on arbitrary rules which do not reflect real life situations and without having to bend and stretch those rules to do justice in individual cases.”  Atwater at 278.  We conclude the employer is entitled to Minnesota coverage under the reasonable expectations doctrine.

The employer’s expectation of coverage was established when the Pool bound the coverage the employer requested, including the Wisconsin Limited Other States Insurance.  At the hearing, Mr. Morrison testified:

Travelers exclusion of Minnesota was based on Ms. Sorenson’s mistaken assumption that the employer had operations in the state.  Had Ms. Sorenson correctly understood Morrison Trucking had no operations in Minnesota, it appears Travelers would not have excluded Minnesota coverage under the Endorsement.  If Minnesota were not listed as an excluded state on the Limited Other States Insurance Endorsement, the policy would require Travelers to reimburse the employer for the Minnesota benefits paid the employee.  Accordingly, but for Ms. Sorenson’s mistaken assumption, Travelers would have expected to provide coverage. Further, there was no premium reduction because Minnesota was excluded.  Thus, Travelers is not assuming a risk for which it was not compensated.  On these facts, Morrison Trucking, Inc., is entitled to coverage under the reasonable expectations doctrine.

We conclude Morrison Trucking, Inc., is entitled to insurance coverage from Travelers Insurance Company for its liability to the employee.  Travelers is ordered to reimburse the Special Compensation Fund for the Minnesota benefits paid to the employee.  Since the employer was insured for the employee’s injury, the penalty awarded the Special Compensation Fund is vacated.