Morrison Trucking, Inc., the employer, appeals the compensation judge’s finding that Travelers Insurance Company did not insure its obligation to pay Minnesota workers’ compensation benefits to the employee, and the judge’s order that the employer reimburse and pay a penalty to the Special Compensation Fund.  We reverse and vacate the compensation judge’s Findings and Order.  Travelers Insurance Company is ordered to reimburse the Special Compensation Fund for the benefits paid to the employee.

Morrison Trucking, Inc., was an over-the-road trucking company owned and operated by Thomas Morrison, located in Hager City, Wisconsin.  From 1997 through 2001, the employer, through the Lawrence-Bohmbach 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-Bohmbach Agency, applied for workers’ compensation insurance through the Wisconsin Worker’s Compensation Insurance Pool (the Pool), administered by the Wisconsin Compensation Rating Board (WCRB).  The employer submitted the ACORD 133 Wisconsin Pool application and a “Supplementary ‘Wisconsin Limited Other States Coverage’ - Request.”  The employer stated in the supplementary request form that some of his “employees” were residents of Minnesota, listing eight employees.  The employer also checked “YES” in response to the question “Do any employees, at any time, work outside the State of Wisconsin?,” explaining that the type of work performed was “truck driv[ing]” and that 95% of the total time worked was spent outside Wisconsin.  (Morrison Trucking Ex. 1.)

The employer paid the deposit premium for the requested coverage, and the WCRB then issued to the employer a Workers Compensation Insurance Pool binder, stating, in part, “Your workers’ compensation insurance coverage is being afforded by the Pool effective 12:01 A.M. on 9/15/01.”  Travelers Insurance Company was assigned to service the employer’s workers’ compensation insurance.  (Morrison Trucking 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.  Item 3.A. of the Information Page, summarizing the coverage provided, states that Part One of the policy applies to the Workers Compensation Law of the state of Wisconsin.  Item 3.C. of the Information Page, entitled “Other States Insurance” states, “COVERAGE EXCLUDED - SEE WI OTHER STATES INSURANCE WC480301.”  The policy contains an endorsement entitled “Wisconsin Limited Other States Insurance Endorsement” number WC 48 03 01 (B) that provides:

Carrie Sorenson was an account manager underwriter for Travelers and dealt exclusively in the involuntary market.  Upon receipt of Morrison’s binder from the Pool, Ms. Sorenson reviewed the binder letter and the employer’s application for coverage and issued the policy of insurance.  Ms. Sorenson agreed the policy provided Wisconsin Limited Other States coverage for all states except Minnesota.  (T. at 112, 116, 118.)  Ms. Sorenson stated she excluded Minnesota from the endorsement because she assumed the employer had operations in Minnesota.  Ms. Sorenson testified, “because [Mr. Morrison] did list the state in which [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.”  Ms. Sorenson stated that the policy excluded “Minnesota benefits to those employees who live and work in Minnesota.”  (T. at 98-100; see also 104, 111-112.)  Ms. Sorenson further testified there was no reduction in premium because of the exclusion of Minnesota from the Wisconsin Limited Other States Insurance Coverage.

Morrison’s truck drivers initiated trips from the employer’s terminal in Hager City, Wisconsin, where the trucks were garaged.  The majority, but not all, of the drivers’ loads were picked up in Northfield, Minnesota, and delivered in Salt Lake City, Utah.  On the return trip, the driver would usually deliver salt to southern Minnesota locations.  The trucks were then returned to the Hager City, Wisconsin, terminal.  The drivers normally traveled through Minnesota, South Dakota, Iowa, Nebraska, Wyoming, and Utah.

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 who processed the claim and paid Wisconsin benefits to the employee as provided by Wisconsin worker’s compensation law.  In 2005, the employee filed a claim in Minnesota seeking benefits under the Minnesota Workers’ Compensation Act.  Travelers denied liability contending Morrison had no coverage and was uninsured for workers’ compensation benefits in Minnesota.  Under Minnesota law, the Special Compensation Fund (the Fund) then became liable for any benefits due the employee.

The Fund then brought a claim against Morrison Trucking seeking reimbursement for any benefits the Fund 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, Morrison, 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 Morrison was uninsured for Minnesota workers’ compensation benefits owed the employee.  The compensation judge found, in part, that 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.  Morrison appealed this decision.

The appeal was heard before a panel of this court and a decision was issued on October 29, 2008.^[1]  Citing Atwater Creamery Co. v. Western Nat’l Mut. Ins. Co., 366 N.W.2d 271 (Minn. 1985) and Hardal v. American Farmers Mut. Cas. Co., 255 N.W.2d 903 (Wis. 1977), this court concluded the employer was entitled to Minnesota coverage under the reasonable expectations doctrine, and reversed the compensation judge.  Travelers Insurance Company appealed to the Supreme Court.  By Order filed May 27, 2009, the Supreme Court ordered “that the decision of the Workers’ Compensation Court of Appeals filed October 29, 2008, be, and the same is, reversed and the matter is remanded for reconsideration in light of Carlson v. Allstate Insurance Company, 749 N.W.2d 41 (Minn. 2008).”  The case on remand was heard and reconsidered by a panel of this court.

The issue in this case is whether the exclusion of coverage for Minnesota workers’ compensation benefits in the Travelers insurance policy is valid and enforceable.  On remand, the appellant employer, Morrison Trucking, again asserts the exclusion at issue was unreasonable, obscure, and hidden.  Citing Carlson v. Allstate Ins. Co., 749 N.W.2d 41 (Minn. 2008), the employer contends the reasonable expectations doctrine, though not broadly applicable, is still appropriate, and should be applied to invalidate the exclusion of liability in this case.  We disagree.

In Carlson, the supreme court reviewed cases subsequent to Atwater^[2] in which a party asserted the reasonable expectations doctrine applied to invalidate a clause or endorsement limiting liability.  The court observed that, in recent cases, application of the doctrine has been increasingly constrained, maintaining, finally, that Board of Regents of the Univ. of Minn. v. Royal Ins. Co. of Am., 517 N.W.2d 888 (Minn. 1994), limits Atwater, “if not to its specific facts” to similarly “egregious situations” in which the challenged clause is ambiguous and the exclusion from coverage is unreasonably hidden.  The court in Carlson noted that “in no case since Atwater have we used the doctrine to provide coverage in contravention of unambiguous policy terms (emphasis added).”  Carlson at 48-49.  Moreover, stated the court, “the doctrine has generated criticism and confusion that gives us pause.”  The court quoted with apparent approval from James M. Fischer, The Doctrine of Reasonable Expectation is Indispensible, If We Only Knew What For?, 5 Conn. Ins. L.J. 151, 165 (1998), stating:

The Supreme Court in Carlson clearly signaled a drawing back from, if not a clear rejection of, the reasonable expectations doctrine, and we are, under these circumstances, reluctant to again apply the doctrine in this case.  First, as interpreted and applied in Carlson and cases cited therein, the doctrine, at least in Minnesota,^[3] appears to require a finding of ambiguity in the terms of the clause or endorsement itself.  In this case, whether it could be said that the endorsement excluding liability was unreasonably obscure or not, the endorsement exclusion itself is not ambiguous.  See, e.g., Hubred v. Control Data Corp., 442 N.W.2d 308 (Minn. 1989).^[4]

Furthermore, we believe application of the reasonable expectations doctrine, clearly questioned by the Supreme Court, is unnecessary in determining the validity of the exclusionary endorsement in this case.

All states in the United States require that workers’ compensation liability be secured.  9 A. and L.K. Larson, Workers’ Compensation Law § 150.01.  An employer may secure its workers’ compensation liability by self-insuring or by purchasing coverage from an insurance company in the so-called voluntary market.  Because coverage is mandatory in every state, the refusal of insurers to issue a policy to an employer is, effectively, a bar to the employer’s doing business in a state.  An employer who is uninsured may be assessed substantial penalties.

Recognizing this problem, the states provide essentially two solutions.  Five states in the United States are monopolistic states and all employers, except those authorized to self-insure, must purchase workers’ compensation insurance from the state fund and the state fund must insure all eligible employers.^[5]  The other forty-five states provide for the purchase of workers’ compensation insurance through what is called the “involuntary” or “residual market.”  Residual market or assigned risk plans are intended as a last resort and employers must demonstrate they have been unable to obtain required workers’ compensation coverage through a private insurance plan.  It should be noted that a substantial number of interstate, long-haul trucking companies are insured through the residual market.  See, e.g., RNW Assocs., Inc. v. Minnesota Workers’ Comp. Assigned Risk Plan, 764 F. Supp. 562, 563 (D.Minn. 1971); Skogquist Trucking and Excavating, Inc. v. Minnesota Workers’ Comp. Assigned Risk Plan, 898 F. Supp. 1349, 1352 (D. Minn. 1995); T. at 59.

In Wisconsin, insurance coverage for all 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 a mandatory risk sharing plan for worker’s compensation insurance under Wis. Stats. § 619.01, the Wisconsin Worker’s Compensation Insurance Pool.^[6]  The WCRB, as the Pool administrator, designates six servicing carriers that act on behalf of the member 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 service to 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.  (Travelers Ex. 1 at 4-6; Travelers Ex. 4 at 9-11, 15.)

Policies written for employers covered under a residual market or assigned risk plan generally include the standard workers’ compensation terms and endorsements provided to employers under policies written for the voluntary market.^[7]  Most workers’ compensation policies, including Minnesota’s and Wisconsin’s, incorporate, at least in part, the standard Workers Compensation and Employers Liability Policy of the National Council of Compensation Insurance (NCCI).  The NCCI also publishes a Basic Manual of Rules, Classifications and Rates for Workers Compensation and Employers Liability Insurance adopted in part in both Wisconsin^[8] and Minnesota.^[9]  (Travelers Ex. 1 at 5.)

Workers’ compensation law is a statutory creation and each state has its own laws.  Included in the statutes of all states are jurisdictional provisions that govern the extraterritorial application of the worker’s compensation act of that state.  While the statutes of the individual states differ, the three major jurisdictional tests adopted by most states are: place of making the contract of hire, place of principal localization of the employment, and place of injury.  9 A. and L.K. Larson, Workers’ Compensation Law § 143.02[1].

There are two different concepts involved.  The contract of hire and principal localization tests address when the “home” state’s law will apply to provide coverage for an out-of-state injury.^[10]  The place of injury test provides coverage to an employee in the state in which the injury occurred, regardless of the employer’s place of business, the residence of the employee, or the location in which the employee’s work was normally performed.^[11]  In a majority of states, the local statute will be applied if any one of these three tests is met.  See, e.g., Larson at § 143.01[1][2], § 143.02[1].

In this case, Travelers accepted liability and paid Wisconsin benefits to the employee for the employee’s out-of-state injury in accordance with the provisions of Wisconsin’s extraterritorial jurisdiction statute.  The employee was also entitled to make, and did make, a claim for Minnesota benefits under Minn. Stat. § 176.041, subd. 4, as the work injury occurred in Minnesota.^[12]

Most job related injuries occur in the state where the employee is hired, regularly works and resides.  Many businesses, however, are not solely intrastate operations.  Some businesses, while principally based in one state, have “operations” in more than one state, such as a plant, a branch office, or a truck terminal.  Other interstate businesses maintain a single location or base of operations, but their employees travel through or to different states.  With increased interstate travel, the odds increase that an out-of-state injury could occur.

“Other States Insurance”^[13] affords a method by which insureds in the voluntary market may be provided coverage for exposures in other states.  There are two sections in the standard policy that apply:  Part One - Workers Compensation Insurance which is Item 3.A. on the Information Page; and Part Three - Other States Insurance which is Item 3.C. on the Information Page.  In the voluntary market, Item 3.A. should list every state where the employer has known “operations” as of the effective date of the policy.  Part Three - Other States Insurance stops the gap in coverage which could result when an insured does not have coverage under Item 3.A.  It is designed to provide automatic, temporary coverage for newly acquired locations and startup operations in other states after the effective date of the policy, as well as coverage for incidental or temporary out-of-state exposures such as business travel by employees.

From a residual/assigned risk market perspective, the use of Other States Insurance is inappropriate because it grants coverage for exposure resulting from the commencement of business operations in other states.  By virtue of the state-specific nature of workers’ compensation statutes and insurance laws, insurers in the residual market generally cannot write coverage for another state.  Therefore, in the residual market, only the state of origin will be listed in item 3.A.

The “Limited Other States Insurance Endorsement” amends the Other States Insurance in the standard policy to provide employers, insured in the residual/assigned risk market, with protection from incidental exposures resulting from interstate travel by employees of the state listed in Item 3.A.  Unlike Part Three, the endorsement does not provide coverage for business operations in other states, but provides coverage only for incidental, temporary out-of-state exposures.  If a claim occurs, the Limited Other States Insurance Endorsement allows an insurance carrier, not authorized to provide coverage directly in a particular state, to make benefit payments indirectly through the employer.  The problem of the inability of a state residual market/assigned risk plan to write coverage in other states is avoided by substituting a contractual right of indemnification or reimbursement between the insurer and employer.

Each servicing carrier participating in the Wisconsin Pool must sign a Servicing Carrier Agreement.  Under the terms of the Agreement, a “servicing carrier is an independent contractor whose rights and obligations are established by [the] Agreement.”  A servicing carrier must perform its duties in accordance with the provisions and requirements set forth in the Pool Handbook and the Wisconsin Basic Manual, incorporated by reference and made a part of the Agreement.  (Travelers Ex. 4-Ex. 1, Art. II, § 2.1; Art. IV, § 4.1.)

The preamble to the Agreement reiterates the Pool is required by Wisconsin law to provide worker’s compensation coverage to any employer unable to obtain insurance in the voluntary market.  The preamble further states the purpose of the Pool’s contract with the servicing carrier is to provide required coverage to eligible employers on behalf of the Pool.^[14]

Included in the Wisconsin Basic Manual are the “Rules Governing The Insuring Of Risks As Required By Section 615.01 Wis. Stats.,” referred to in the preamble to the Agreement and in the Handbook.  (Travelers Ex. 4-Ex.1, p. 2; Handbook, supra n.9 at 22, Part One of the Appendix, pages A-72 to A-76.)  Rule II states that any risk entitled to be insured for worker’s compensation may be covered by making application to the WCRB.^[15]  Rule III.A. requires the servicing carrier to issue a policy of insurance to the applicant upon receipt from the Pool of the binder, on the basis of the classifications and rates shown in the notice of designation (binder).^[16]

The Handbook also includes performance standards for servicing carriers, which Travelers was in this case.  The Handbook requires the servicing carrier to issue an insurance policy, including requested endorsements, within 30 days of receipt of the premium deposit and completed application.  If there is a question of eligibility, the servicing carrier must contact the Pool.^[17]  Under Rule III.A.2., additional information requested by the servicing carrier will be provided within a reasonable time.  There is no evidence Travelers contacted the Pool concerning the employer’s eligibility for Wisconsin Limited Other States coverage or requested additional information to clarify the employer’s eligibility for the requested coverage.

Section II of the Handbook, “Application to the Pool and Binding of Coverage,” provides, in part:

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 Limited Other States Insurance Endorsement.  Travelers, nonetheless, contends it properly issued a worker’s compensation insurance policy to the employer, and did not improperly limit the employer’s coverage under the Limited Other States Insurance Endorsement by excluding coverage for the state of Minnesota.

Resolution of the question of whether Travelers validly and properly excluded Minnesota under the policy issued to Morrison Trucking requires a review of the construction and application of the Wisconsin Limited Other States Insurance Endorsement.  The endorsement states in pertinent part:

Travelers makes essentially four arguments: that Minnesota coverage is not available through the Wisconsin Pool; that the employer had “operations” in the state of Minnesota requiring the employer to obtain insurance coverage in Minnesota; that the Limited Other States Insurance Endorsement is intended to provided coverage only for employees “who regularly work” in Wisconsin; and that the employer had employees who resided in Minnesota creating a “known risk” that Travelers was not required to insure.

a.  Minnesota coverage is not available through the Wisconsin Pool.  Travelers argues that Morrison Trucking was not eligible for Minnesota coverage through the Wisconsin Pool.  Travelers points to the testimony of Ralph Hermann, President of the WCRB, that “the assigned risk pool is not authorized to write business outside of the state of Wisconsin, so we are . . . not permitted to issue a policy covering exposure in another state.”  (Travelers Ex. 4 at 21.)  Accordingly, Travelers contends Minnesota coverage was never available to the employer through the Wisconsin Pool.  We disagree.

There is no dispute the Wisconsin Pool cannot write Minnesota worker’s compensation insurance coverage.  Traveler’s argument, however, misses the point and misstates the issue.  The issue is not whether the Wisconsin Pool can provide Minnesota coverage but whether the Wisconsin Pool can provide coverage for a Wisconsin employee who is injured outside the state of Wisconsin and elects coverage in the state of injury.  The coverage provided by the Wisconsin Limited Other States Insurance Endorsement is not 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 benefits the employer may owe under the workers’ compensation law of the state of injury.  This coverage the Pool can and does provide.

It is clear that Limited Other States Insurance is available through the Wisconsin Pool to cover potential liability outside of Wisconsin.^[18]  The Pool provided the supplemental request form necessary to apply for such coverage and directed applicants to complete the supplemental form if such coverage was needed.  And, in fact, Wisconsin Limited Other States Insurance was provided by the Pool to the employer in this case - in every state except Minnesota.  Had Minnesota not been excluded from 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 33.)

The business of the employer was interstate trucking, and its employees were exposed to certain employment hazards by virtue of the job in which they were engaged.  The job required them to travel to and through multiple states outside Wisconsin.  Limited Other States Insurance coverage is available through the Wisconsin Pool precisely to provide temporary and incidental coverage to employers like Morrison whose employees travel outside the state of Wisconsin.

b.  Minnesota “operations.”  Ms. Sorenson, a workers’ compensation underwriter for Travelers, testified she excluded Minnesota when she processed the endorsement because Morrison had “employees listed there living in Minnesota and 95 percent of [Morrison’s] work was outside of Wisconsin” “so that said to me that [Morrison Trucking] has Minnesota operations, exclude Minnesota.”  (T. at 99, 112.)

The Wisconsin Worker’s Compensation Insurance Pool Information and Procedures (the Handbook) states, in part:

The term “operations” is not defined in the Wisconsin Pool rules or the Handbook, nor in Wisconsin statutes or rules.  In construing the term, we are guided by the maxim that in interpreting an insurance contract, undefined words are to be given their usual and accepted meaning.  Progressive Specialty Ins. Co. v. Widness, 635 N.W.2d 516 (Minn. 2001); Kremers-Urban Co. v. American Employers Ins., 351 N.W.2d 156 (Wis. 1984).  We, accordingly, look to related documents to determine the common and ordinary use of the term in the context of workers’ compensation residual market/assigned risk policies.

An employer insured through the Pool is subject to the same rules, rates, and classifications as employers insured in the voluntary market.  (Travelers Ex. 1 at 5, 7.)  The Wisconsin Worker’s Compensation and Employers Liability Insurance Manual (Basic Manual) contains the classifications for Worker’s Compensation and Employers’ Liability Insurance.  The classification applied to Morrison was “7229 Trucking.”  (Morrison Trucking Ex. 1.)  The Wisconsin Worker’s Compensation Class Code Manual states:^[19]

The NCCI “Producer’s Guide” provides an explanation of how the NCCI Residual Market Limited Other States Insurance Endorsement applies to interstate businesses.^[20]  The guide contains a section dealing specifically with the trucking industry which provides:

To determine whether Morrison had “operations” in Minnesota that should have been covered by a Minnesota policy, we look to the insurance provisions of Minnesota.  The Minnesota Basic Manual, Classification Interpretations, “Truckers - Interstate Operations” similarly provides:

Mr. Morrison testified the employer maintained an office and a repair shop in Hager City, Wisconsin, and that was where the trucks were garaged.  He stated all the business of the trucking company was performed in Hager City: obtaining accounts, hiring drivers, working on trucks, dispatching trips, and clerical work including payroll and issuing paychecks.  Mr. Morrison further testified that his employees, whether they lived in Minnesota or Wisconsin, picked up a truck in Hager City at the start of their trip and returned the truck to Hager City Wisconsin, at the end of each trip.  (T. at 25, 35-36, 49.)  It is clear from the evidence that the employer’s principal garaging and base terminal was located in Hager City, Wisconsin.  Ms. Sorenson testified that Travelers performed no investigation into the actual operations of Morrison Trucking.  (T. at 112.)  Mr. Morrison testified Morrison Trucking did not have any business operations outside of Wisconsin (T. at 31) and there was no evidence to the contrary.  Accordingly, Morrison had no “operations” to insure in Minnesota and was not required to obtain an insurance policy in Minnesota.

c.  Must regularly work in Wisconsin.  Travelers asserts the Wisconsin Limited Other States Insurance available through the Wisconsin Pool is intended to provided coverage to a Wisconsin employer for injury only to employees “who regularly work[] in Wisconsin.”^[21]  Since the employer, in its supplementary coverage request, listed employees residing in Minnesota and that its drivers spent 95% of their time outside Wisconsin, Travelers contends that coverage for Minnesota benefits was properly excluded.

Generally, a state’s worker’s compensation act applies to employment “principally localized” within the state, provided the out-of-state employment was temporary, and was not to be performed exclusively there.  Larson at § 143.01[2].  Larson observes that “[i]n some kinds of employment, like trucking . . . the employee may be constantly coming and going without spending any longer sustained periods in the local state than anywhere else; but a status rooted in the local state by the original creation of the employment relation there, is not lost merely on the strength of the relative amount of time spent in the local state as against foreign states.”  Larson at §143.04[2][c].

Wis. Stats. § 102.03(1)(c) provides that liability shall exist against an employer “[w]here, at the time of the injury, the employee is performing service growing out of and incidental to his or her employment.”  Section (1)(f) states, “Every employee whose employment requires the employee to travel shall be deemed to be performing service growing out of and incidental to the employee’s employment at all times while on a trip . . . .”  In Simonton v. Dep’t of Indus., Labor and Human Rels., 62 Wis.2d 112, 214 N.W.2d 302 (1974), a truck driver was hired in South Dakota by a Wisconsin employer and sustained an injury in Minnesota.  At the time of his injury, 90% of the employee’s trips were between Watertown, South Dakota, and points in Minnesota.  The employee’s spouse brought a claim for Wisconsin benefits.  In awarding benefits, the Wisconsin Supreme Court stated, “It is immaterial that at or about the time of the accident a major portion of the work was done in Minnesota or South Dakota.  The test is not the quantity of work performed in Wisconsin as compared to that done in another state, but is rather whether the work performed was incidental to a Wisconsin employer-employee relationship.”  Id. at 308.  The court observed, “The fundamental idea upon which liability is imposed is that an injury to an employee . . . is a burden that should be borne by the product of the industry. . . . ’ (Citation omitted.) . . . In the instant case the product sold was the trucking services of the employer . . . . The burden of liability for workmen’s compensation payments was assumed by the employer and payments were made to an insurer to afford protection from that liability.”  Id. at 307.

There is no dispute the work being performed by Bryan Martin was incidental to a Wisconsin employer-employee relationship.  Travelers paid to the employee the benefits to which he was entitled under Wisconsin law.  Moreover, although the employee was a resident of Minnesota, the trucking business was principally localized in Wisconsin, where the employer’s facilities were located, the trucks were garaged, and its employees began and ended their trips.  Morrison’s employees’ presence in states other than Wisconsin was temporary and incidental to the work of making deliveries for Morrison Trucking customers.  The employee “regularly worked” in Wisconsin where the employer-employee relationship, as defined by Wisconsin law, indisputably existed.  Compare, e.g., Hoffman v. Dutch Mill Trucking, 50 W.C.D. 186 (W.C.C.A. 1993); Pederson v. Service Specs. of Am., 52 W.C.D. 399 (W.C.C.A. 1994).

Accordingly, the time spent by Morrison employees working outside of the state of Wisconsin is not a legal basis to limit or exclude Minnesota from coverage under the Limited Other States Insurance Endorsement.

d.  Minnesota residents.  There is no dispute that Part One of the Travelers insurance policy provided Wisconsin workers’ compensation coverage for all of Morrison Trucking’s employees.  The fact that Mr. Martin was a Minnesota resident did not affect coverage for Morrison or make the employee ineligible for Wisconsin workers’ compensation benefits.^[22]  Travelers does, however, contend the fact that Morrison had employees who were residents of Minnesota created a “known, appreciable risk” and was a legitimate basis for excluding Minnesota coverage under the Wisconsin Limited Other States Insurance Endorsement.  We disagree.

Because of the jurisdictional provisions of laws of states other than Wisconsin, a Morrison employee injured while traveling outside of Wisconsin may also be entitled to claim benefits in the state where the injury occurred.  This risk is inherent in, well known, and appreciated in the long-haul trucking industry.  Since long-distance truck drivers invariably cross state lines, it is understood that a truck driver may sustain an injury in another state and may be entitled to bring a claim in that state.  Because this is a foreseeable risk for employers, it is a risk that must be insured so the employer can conduct its business.  Limited Other States Insurance coverage exists specifically to insure against this risk.  Travelers does not dispute that Morrison was provided coverage under the Wisconsin Limited Other States Insurance Endorsement for claims made in all states except Minnesota.

Bryan Martin, although he resided in Rochester, Minnesota, was a Wisconsin employee eligible for Wisconsin workers’ compensation benefits by virtue of being employed by a Wisconsin employer.  See Wis. Stats. § 102.03(1).^[23]  Nowhere in the Wisconsin statute is an employee’s place of residence a factor in determining eligibility for benefits.

Under both Wisconsin and Minnesota law, an employee is entitled to claim benefits in the state of injury regardless of the employee’s place of residence.  See Wis. Stats. § 102.03(5); Minn. Stat. § 176.041, subd. 4; Estate of Torres v. Morales, 2008 WI App 113, 765 N.W.2d 662, 665 (2008)(the relevant definition of “employee” says nothing about the employee’s residence or usual place of employment).  The risk that Morrison Trucking needed to insure was the risk that one of its drivers would be injured outside of Wisconsin and bring a claim in the state of injury.  The residence of the injured employee does not alter or increase that risk.  Had Mr. Martin been instead a resident of Utah or Wisconsin, and been injured in Minnesota, Morrison faced exactly the same potential liability under Minnesota law.  We conclude, therefore, the residence of an employee is not a legal basis for excluding Minnesota from coverage under the Wisconsin Limited Other States Insurance Endorsement.

The employer asserts there is no legitimate reason for the exclusion of Minnesota from coverage under the Wisconsin Limited States Insurance Endorsement, and the purported exclusion is invalid and unenforceable.

In both Wisconsin and Minnesota, the state workers’ compensation act requires that an employer carry insurance to the full extent of its liability to an injured employee.  The insurer’s liability under the act is coextensive with that of the insured employer.  See, e.g., Roeder v. Kruger, 223 Minn. 79, 25 N.W.2d 686 (1946); Yoselowitz v. Peoples Bakery, 201 Minn. 600, 277 N.W.2d 221 (1938); State v. Koch, 195 Wis.2d 801, 537 N.W.2d 39 (Wis. App. 1995); Maryland Cas. Co. v. Industrial Comm’n, 198 Wis. 202, 223 N.W. 444 (1929).  In Douglas County v. Industrial Comm’n., 275 Wis. 309, 81 N.W.2d 807 (1957), the Wisconsin Supreme Court noted that Wis. Stats. §. 102.31(1)(a), provides that the insurance contract “shall be construed to grant full coverage of all liability of the insured under and according to the provisions” of the act.  Id. at 811.  The court described the nature of the liability of an insurance company, under its policy of worker’s compensation insurance, in light of the statutory provisions, stating:

The purpose of the mandatory coverage requirement of the Worker’s Compensation Act - - and for employers unable to obtain insurance through the voluntary market, the purpose of the Wisconsin Worker’s Compensation Insurance Pool - - is the protection of injured workers and their employers by assuring that the employer is insured to the full extent of its liability.  See, e.g., Nelson v. Rothering, 174 Wis.2d 296, 496 N.W.2d 87 (Wis. 1993).  Under Wis. Stats. § 102.28(2)(a), an employer is required to insure payment for all employees and for all working conditions.  State v. Koch at 43-44.

A Wisconsin interstate, long-haul trucking company, in addition to potential liability for injuries in Wisconsin and for Wisconsin benefits for out-of-state injuries, has potential exposure for liability under the laws of other states for an injury to an employee that occurred in another state.  The measure of the insurer’s liability under Wis. Stats. § 102.28(2)(a) is the employer’s liability to its injured employees.  Coverage for interstate travel, in the states through which the employer’s drivers travel and in which they pick up and deliver loads, can only be viewed as essential to the business of the employer.  (See T. 29-30, 40.)  Without such coverage, the employer is clearly uninsured for the business in which it is engaged.

Morrison Trucking’s business was located in Hager City, Wisconsin, near the Minnesota border.  Its Minnesota and Wisconsin drivers drove to and through Minnesota in the course of the business of picking up and delivering loads for Morrison Trucking customers.  There was an obvious risk of an injury in Minnesota and therefore the potential of a claim for Minnesota benefits under the in-state injury jurisdictional test.  This is why, in part, interstate trucking companies are high risk and why so many are covered by residual market/assigned risk plans.

Wis. Stats. § 619.01, Mandatory risk-sharing plans, states in subdivision (3), Duty to provide service, that “[e]very participating insurer . . . shall provide to any person seeking coverages of the kinds available in the plans the services prescribed in the plans.” (Emphasis added.)  It is clear that Wisconsin Limited Other States Insurance is “coverage[] of the kinds available” through the Wisconsin Pool to cover liability for employees who travel outside the state of Wisconsin who “happen[] to be in another state at the time the compensable injury occurs, and elect[] coverage in the other state.”  (Travelers Ex. 1 at 29.)

As discussed previously, we see no legitimate basis for Travelers’ exclusion of Minnesota from coverage under the Wisconsin Limited Other States Insurance Coverage.  As a service carrier for the Wisconsin Pool, providing insurance coverage of last resort, Travelers was obligated to provide coverage to the employer necessary to meet its mandated responsibility of obtaining compensation insurance to cover the full extent of its liability to its employees.  The fact that travel in Minnesota posed a “known, appreciable risk” is not a sufficient basis for excluding Minnesota from coverage.  This was not a voluntary market plan and Travelers could not elect to exclude necessary coverage simply because it did not want to underwrite the risk - - hence the term “involuntary market.”

Wis. Stats. § 102.31(1)(a) provides that “[e]very contract for the insurance of compensation provided under this chapter or against liability therefore is subject to this chapter and provisions inconsistent with this chapter are void.”  Wis. Stats. § 631.15(3m) further states, “[a] policy that violates a statute or rule is enforceable against the insurer as if it conformed to the statute or rule.”  An insurance policy may expand but not reduce the coverage required by statute.  Any policy provisions effectively reducing the coverage required by the statute are void and therefore unenforceable.  Nicholson v. Home Ins. Co., 137 Wis.2d 581, 405 N.W.2d 327 (1987).  Here, the exclusion of Minnesota from the Wisconsin Limited Other States Insurance coverage is inconsistent with the insurer’s obligation to the employer under the mandatory coverage requirement of Wis. Stats. §102.28(2)(a).

In State v. Koch, 537 N.W.2d 39, the state of Wisconsin claimed the employer, an interstate trucking business, failed to provide worker’s compensation insurance in violation of Wis. Stats. §102.28(2)(a).  The Supreme Court held the employer’s contractual agreement with one of its customers was inconsistent with the statutory mandate and void, stating, “the statute when read with § 102.31, and the general principles of ch. 102, reasonably advises that a covered employer must provide insurance for every employee and for every potential activity engaged in by its employees.”  Id. at 46.  Under the statute, employers must provide full coverage - and cannot limit coverage to certain employers or certain working conditions.  Id. at 44.

Minnesota law similarly provides that terms in a policy of insurance that conflict with statutory requirements may be held invalid.  Carlson at 46.  In Kwong v. Depositors Ins. Co., 627 N.W.2d 52, 55 (Minn. 2001), the Minnesota Supreme Court stated, “We have recognized that so long as an insurance contract does not omit statutorily mandated coverage or otherwise contravene the applicable statutes, the contract governs the insurer’s liability.  (Citation omitted.)  However policy terms that conflict with the [applicable Act] will be held invalid.”  In Minnesota, the power to refuse to enforce insurance contract terms is limited to situations where the contract would violate “some explicit public policy” that is well defined and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest.  St. Paul Fire & Marine Ins. Co. v. Federal Deposit Ins. Corp., 968 F.2d 695 (8th Cir. 1992).

Both Wisconsin and Minnesota have expressed a strong public policy interest in insuring full coverage of an employer’s liability to its employees.  In Simonton, the Wisconsin Supreme court reiterated public policy concerns with respect to an employee, who qualifies under the Wisconsin act, and whose work for a Wisconsin employer may require travel outside the state.  The court noted the heavy burden to which Wisconsin employers may be subject if they are unexpectedly deprived of coverage under the Wisconsin law and are exposed to the liability of the compensation laws of other jurisdictions in which they may be operating.  Simonton, 214 N.W.2d at 307.  In State v. Koch, 537 N.W.2d at 46, the court noted, “[t]he object of the statute is to support the legitimate state policy of avoiding uncompensated workplace injuries.”

Since the employer must get full insurance from some source, and the insurer is to be paid the just premium, there is nothing unreasonable in requiring the insurer to yield to the public welfare.  Skuey v. Bjerkan 173 Minn. 354, 217 N.W. 358 (1928).  The placement of rejected risks is the designation, pursuant to statute, of member insurers as carriers of specific risks unable to obtain voluntary insurance.  The objects sought to be achieved are the insurance of all compensation risks in solvent carriers for the protection of the employer, employee and the public.  In these matters the public has an interest.  Yoselowitz, 277 N.W. at 224-25.

The Wisconsin Worker’s Compensation Act requires a Wisconsin employer to obtain insurance, and the insurer to provide insurance, for worker’s compensation liability to the full extent of the employer’s liability to its employees.  The exclusion of Minnesota is inconsistent with the mandatory coverage provisions of the act and is contrary to public policy.  The purported exclusion is arbitrary and invalid and cannot be enforced to prevent coverage of Morrison’s Trucking liability to the employee in Minnesota.  We, according, reverse the finding that Morrison Trucking was not insured for workers’ compensation liability for Minnesota workers’ compensation benefits by Travelers Insurance Company.  We vacate the penalty assessment, and order Travelers to reimburse the Special Compensation Fund for the benefits paid to the employee.