Monopolistic States
Written by Justin Goodman, CIC, CISC, CLCS, CEO and Co-Founder, Total CSR
Published: October 2, 2026 · Last reviewed: October 2, 2026
In plain language: Monopolistic states require employers to buy workers' compensation insurance directly from a state-run fund, not from a private insurance company. An employer with workers in one of these states cannot shop the open market for that coverage, no matter how good their safety record is.
Technical definition: Monopolistic states are jurisdictions, currently North Dakota, Ohio, Washington, and Wyoming, where state law requires employers to obtain workers' compensation coverage exclusively through a state workers' compensation fund. Private carriers cannot write primary workers' compensation policies there, though employers liability coverage may still require separate placement.
Monopolistic States at a Glance
| Attribute | Detail |
|---|---|
| Also known as | Exclusive state fund states, state-fund-only jurisdictions |
| Category | Workers' compensation regulatory structure |
| Lines of business | Workers' Compensation, Employers Liability |
| Industries most affected | Construction, manufacturing, staffing, multi-state employers, transportation |
| Current monopolistic states | North Dakota, Ohio, Washington, Wyoming |
| Who bears the risk | Employers with operations or employees in a monopolistic state |
| Common solution | Stop gap employers liability coverage added to the general liability or a separate policy |
| Also interacts with | Multi-state workers' compensation programs, employers liability, general liability policies |
Key Takeaways
- Monopolistic states are states where workers' compensation coverage must be purchased from a state fund rather than a private carrier, currently North Dakota, Ohio, Washington, and Wyoming.
- Agencies writing multi-state employers must identify monopolistic state exposure early, because the standard workers' compensation policy cannot provide that coverage and a separate state fund account is required.
- The most common misunderstanding is assuming a standard workers' compensation and employers liability policy covers employers liability exposure in a monopolistic state, when in fact that gap must be filled separately.
- A quick win is maintaining a monopolistic state checklist during new business intake so stop gap coverage is quoted before binding, not discovered after a claim.
What Is Monopolistic States in Insurance?
Monopolistic states is the term used in workers' compensation underwriting to describe jurisdictions that bar private insurers from writing primary workers' compensation coverage. North Dakota, Ohio, Washington, and Wyoming each operate a state fund that collects premiums, adjudicates claims, and pays benefits directly to injured workers. The system exists because these states decided, decades ago, that a single state-administered fund could guarantee solvency and consistent benefit delivery better than a competitive private market.
The structure matters because a standard ISO workers' compensation and employers liability policy excludes these states by design. Part One (Workers' Compensation Insurance) and Part Two (Employers Liability Insurance) of the standard policy do not apply in a state where the law forbids private carriers from writing that coverage. An employer based in Pennsylvania with a single warehouse worker in Ohio still needs an Ohio state fund account for that employee, even if every other location is covered under a conventional policy.
Consider a regional trucking company headquartered in Indiana that opens a terminal in Toledo, Ohio. The company's existing workers' compensation carrier cannot extend coverage to the Ohio drivers. The employer must register with the Ohio Bureau of Workers' Compensation and pay premium directly to the state fund for those employees, while employers liability exposure arising from Ohio injuries typically requires a stop gap endorsement or policy, since the state fund does not provide employers liability protection the way a private carrier policy does.
How Does Monopolistic States Work?
- The hiring decision. An employer places one or more workers, or opens an operating location, in North Dakota, Ohio, Washington, or Wyoming.
- The coverage gap. The employer's existing workers' compensation and employers liability policy automatically excludes that state, because private carriers are legally barred from writing primary coverage there.
- The state fund registration. The employer opens an account with the applicable state fund, reports payroll, and pays premium according to that state's classification and rating rules.
- The employers liability gap. The agency identifies that the state fund does not include employers liability coverage, and arranges stop gap coverage, often added by endorsement to the general liability policy or through a monopolistic state employers liability policy.
- The claim. An injury occurs, and benefits are paid by the state fund directly; any third-party or employers liability lawsuit is handled under the separately placed stop gap coverage rather than the standard workers' compensation policy.
Real Claim Examples Involving Monopolistic States
Warehouse worker injury in Ohio with no stop gap in place
A logistics company based in Michigan opened a small Ohio distribution hub and assumed its national workers' compensation policy covered the new location. A forklift accident injured an employee, and the employer discovered the Ohio Bureau of Workers' Compensation required a separate state fund account that had never been established. The employer faced penalties for operating without proper coverage and had to retroactively register, while the employee's benefits were delayed during the dispute.
Employers liability suit in Washington with stop gap coverage
A construction subcontractor working in Washington state carried proper state fund coverage for workers' compensation benefits but also carried a stop gap employers liability policy. An injured worker's spouse filed a loss of consortium claim against the employer, which the Washington state fund does not cover. The stop gap policy responded to the lawsuit, paying defense costs and the eventual settlement, demonstrating why the separate placement mattered.
Multi-state manufacturer missing North Dakota exposure
A manufacturer headquartered in Minnesota sent a crew of employees to a temporary job site in North Dakota for several months. The agency servicing the account had not flagged North Dakota as monopolistic during the renewal review, and the employer had no Workforce Safety & Insurance account when a worker was injured on site. The resulting coverage gap became an E&O claim against the agency for failing to identify the exposure during account rounding.
Monopolistic States vs. Competitive State Fund: What Is the Difference?
Monopolistic states bar private carriers entirely, while a competitive state fund operates in states that also allow private insurers to write workers' compensation, giving employers a choice between the state fund and the open market. Understanding this distinction prevents agencies from assuming every state fund works the same way.
| Comparison area | Monopolistic States | Competitive State Fund |
|---|---|---|
| Primary use case | Mandatory sole source of workers' compensation coverage | Optional alternative to private carriers |
| Coverage / concept type | Exclusive state-run system | State fund competing alongside private insurers |
| Typical exclusions | Employers liability, requiring stop gap coverage | Generally none beyond standard workers' comp exclusions |
| Who is most affected by errors | Multi-state employers and their agencies | Employers comparing state fund versus private pricing |
| Common mistakes | Assuming the standard policy covers the state | Assuming the state fund is the only option available |
What Are the Most Common Mistakes With Monopolistic States?
- Assuming a national workers' compensation policy extends automatically to a monopolistic state, which creates an uninsured exposure the moment an employee works there.
- Failing to add stop gap employers liability coverage, leaving the employer exposed to third-party lawsuits the state fund will not cover.
- Overlooking temporary or seasonal employees sent into a monopolistic state for short-term projects, since even brief assignments trigger the registration requirement.
- Confusing monopolistic states with competitive state funds, which leads agencies to incorrectly tell a client they have a choice of carrier when none exists.
- Not documenting the monopolistic state discussion in the agency management system, which weakens the agency's defense if a coverage gap later becomes an E&O claim.
- Treating stop gap coverage as optional rather than essential, when in several of these states it is the only mechanism for employers liability protection.
How to Explain Monopolistic States to a Client
Explaining Monopolistic States to a personal lines client
Monopolistic states rarely apply to personal lines, but if a client asks because they are starting a small business with a household employee in Washington, for example, the explanation is simple: Washington requires the client to buy workers' compensation coverage directly from the state, not from the client's homeowner or business insurance company.
Explaining Monopolistic States to a small business owner
Monopolistic states mean that if the client has even one employee working in North Dakota, Ohio, Washington, or Wyoming, the client cannot use their current workers' compensation carrier for that employee. The client needs to open an account with that state's fund directly, and the agency will also look at adding stop gap coverage so the client is protected if an injured employee's family sues over the injury.
Explaining Monopolistic States to a CFO or risk manager
Monopolistic states create a structural gap in a national workers' compensation program wherever the company has payroll exposure in North Dakota, Ohio, Washington, or Wyoming, because private carriers cannot write primary coverage there. The agency's role is to confirm state fund registration in each applicable jurisdiction and to layer in stop gap employers liability coverage, since the state fund excludes third-party and loss-of-consortium suits that a standard employers liability policy would otherwise cover.
Frequently Asked Questions About Monopolistic States
Which states are currently monopolistic states?
North Dakota, Ohio, Washington, and Wyoming are the four monopolistic states as of 2026. Each requires employers to purchase workers' compensation coverage through a state-run fund rather than a private insurance carrier.
Can a private insurance company write workers' compensation in a monopolistic state?
A private insurance company cannot write primary workers' compensation coverage in a monopolistic state. Private carriers can, however, often write stop gap employers liability coverage to fill the gap the state fund leaves open.
What is stop gap coverage and why does it matter in monopolistic states?
Stop gap coverage is employers liability insurance that fills the gap created because monopolistic state funds typically provide workers' compensation benefits but not employers liability protection. Without it, an employer has no coverage for third-party lawsuits like loss of consortium claims arising from a workplace injury.
Does a multi-state workers' compensation policy automatically cover monopolistic states?
A multi-state workers' compensation policy does not automatically cover monopolistic states, because private carriers are legally barred from writing that primary coverage there. The policy's "Other States" provision in Item 3C of the Information Page typically lists monopolistic states as excluded, requiring separate state fund registration.
What happens if an employer fails to register with the state fund in a monopolistic state?
An employer operating without proper state fund registration in a monopolistic state can face monetary penalties, back premium assessments, and personal liability for workplace injury costs the fund would otherwise have paid. Some states also allow injured employees to sue uninsured employers directly outside the normal workers' compensation system.
Did Nevada or West Virginia used to be monopolistic states?
Nevada and West Virginia were historically monopolistic states but both transitioned to competitive markets, West Virginia in 2008 and Nevada decades earlier, allowing private carriers to write workers' compensation coverage. Agencies should always verify current status rather than relying on outdated lists, since monopolistic state status can change through legislation.
Related Insurance Terms
- Workers' Compensation Insurance: Statutory coverage paying medical and lost wage benefits to employees injured on the job, administered through private carriers in most states but exclusively through state funds in monopolistic states.
- Employers Liability Insurance: Coverage under Part Two of a standard workers' compensation policy protecting employers against lawsuits related to workplace injuries, notably absent from monopolistic state fund coverage and requiring stop gap placement instead.
- Stop Gap Coverage: An endorsement or standalone policy that restores employers liability protection in a monopolistic state, since the state fund does not provide it.
- Competitive State Fund: A state-operated workers' compensation fund that competes alongside private insurers, distinct from a monopolistic state fund that operates as the sole provider.
- Residual Market: The assigned risk pool that provides workers' compensation coverage to employers unable to obtain it in the voluntary market, a separate mechanism from monopolistic state funds.
- Other States Insurance: A provision in the standard workers' compensation policy extending coverage to states where the employer later begins operations, which does not apply to monopolistic states listed as excluded.
Sources and References
- Ohio Bureau of Workers' Compensation. Workers' Compensation.
- Washington State Department of Labor & Industries. Workers' Compensation Insurance.
- North Dakota Workforce Safety & Insurance. Workers' Compensation Program.
About the Author
Justin Goodman, CIC, CCIP, CISC, CLCS, CRIS, PCIA, QCLS, MFHR CEO and Co-Founder, Total CSR, Inc.
Justin Goodman is a third-generation insurance broker with over two decades in agency operations. He has trained more than 100,000 CSRs, account managers, and producers in commercial and personal lines coverage, from workers' compensation to construction risk. He was named 2024 Insurance Journal Agent of the Year and one of the nation's top five construction insurance experts by Risk & Insurance. He is the author of Retain, which applies cognitive science research on memory and knowledge transfer to insurance training, and speaks nationally on how agencies build durable technical expertise in their teams.