13.2 Part One (Workers Comp) and Part Two (Employers Liability)

One Policy, Two Insuring Agreements

The Workers Compensation and Employers Liability Policy — NCCI form WC 00 00 00 C — is filed by the National Council on Compensation Insurance and used nationwide. It contains two distinct insuring agreements:

• Part One — Workers Compensation Insurance (statutory benefits)
• Part Two — Employers Liability Insurance (tort liability)

The Information Page (the declarations) is the heart of the form. Item 3.A lists the states whose comp law the insurer will satisfy under Part One. Item 3.B shows the Part Two limits. Item 3.C lists Other States Insurance states. Item 4 describes the rating classifications.

Part One: Workers Compensation Insurance

Under Part One (Coverage A) the insurer promises to pay, on the employer's behalf, all benefits required by the workers compensation law of any state listed in Item 3.A. Its defining feature is that there is no dollar limit. Whatever the statute commands — including a multimillion-dollar catastrophic claim — the insurer pays in full.

Exam Key: Part One has no limit because the obligation is set by statute, not by the contract. The insurer simply steps into the employer's statutory shoes. Contrast Part Two, which always carries dollar limits.

Part Two: Employers Liability Insurance

Part Two (Coverage B) is true liability insurance. It pays sums the employer becomes legally liable to pay as damages because of bodily injury by accident or disease to an employee, when that injury is not covered by the comp statute but is still job-related. It fills the gaps where an employee (or someone on the employee's behalf) sues in tort. Typical Part Two claims:

• Third-party-over (action over): a hurt worker sues a machine maker; the maker then sues the employer for indemnity.
• Loss of consortium: a spouse sues for loss of companionship.
• Consequential bodily injury: a family member's injury flowing from the worker's injury.
• Dual-capacity: the employer is also the product manufacturer.
• Care and loss of services of the injured worker.

Part Two Limits: 100/500/100

Unlike Part One, Part Two carries three separate dollar limits shown in Item 3.B. The standard minimum limits are written as 100,000 / 500,000 / 100,000:

Trap: The $500,000 disease limit is an aggregate policy limit, not per employee. The per-accident and per-employee figures are both $100,000 at the standard level. Higher limits can be purchased.

Worked Example: Disease Aggregate

Assume an employer carries standard Part Two limits 100,000 / 500,000 / 100,000. Over the policy year, seven employees develop a covered occupational lung disease and sue in tort. Each is awarded $100,000.

• Each claim is within the $100,000 each-employee disease limit.
• Seven claims x $100,000 = $700,000 in awards.
• But the disease policy aggregate is $500,000. The insurer pays only $500,000 total; the remaining $200,000 is the employer's responsibility (or covered by excess).

Trap: Each individual award fits the per-employee limit, yet the aggregate caps total disease payments at $500,000. Always test claims against both the per-employee and the aggregate limit.

Defense, Settlement, and the Bargain

Under Part Two the insurer has the duty to defend the employer against covered suits, and defense costs are paid in addition to the limits. The insurer will not defend or pay for liability assumed under contract, fines or penalties for statutory violations, punitive damages for illegal employment, or obligations under unemployment, disability-benefit, or OSHA laws.

Part Two coverage is what preserves the exclusive-remedy bargain economically: when an injured worker's lawyer finds a way around the statute (consortium, dual-capacity, action-over), Part Two responds so the employer is not left exposed to uninsured tort verdicts.

Reading the Information Page

Memorize the layout of the Information Page, because exam questions describe a fact pattern and ask which Item controls:

• Item 1 — the named insured and mailing address.
• Item 2 — the policy period (12:01 a.m. standard time at the insured's address).
• Item 3.A — states with full Part One statutory coverage.
• Item 3.B — Part Two employers-liability limits (the 100/500/100 figures).
• Item 3.C — Other States Insurance.
• Item 3.D — endorsements attached.
• Item 4 — classifications, estimated payroll, rates, and estimated premium.

Because estimated premium in Item 4 is only an estimate, the policy is subject to audit — the same audit mechanism that drives Section 13.3. A common test point: the policy period and the audit basis both live on this one page, tying coverage to premium.