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

Two Parts of One Policy

The contract sold by private insurers is the NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00. It has two operative parts you must keep straight:

Part One Pays Whatever the Statute Requires

Part One (Coverage A) is the insurer's promise to pay, on the employer's behalf, the benefits required by the workers' compensation law of any state listed in Item 3.A of the Information Page. Its defining feature: there is no dollar limit. Whatever the statute commands - a $4 million catastrophic spinal claim included - the insurer pays.

Exam Key: Part One has no limit because the obligation is fixed by statute, not by the contract. Part Two always carries dollar limits.

Before any benefit is owed, the injury must arise out of and in the course of employment (AOE/COE). The coming-and-going rule is the most-tested application: an ordinary commute is not in the course of employment, so a crash on the way to work is usually not compensable. Exceptions that restore coverage include a special errand at the employer's request, a traveling employee, employer-provided transport, and injury on the employer's premises (the parking-lot rule).

Why Part Two Exists

The exclusive remedy bargain blocks most employee suits, but not all injury-related liability. Part Two (Coverage B), Employers Liability, pays sums the employer becomes legally obligated to pay as damages for a covered work-related bodily injury when the comp statute does not bar the action. Unlike Part One, it is true liability insurance - it has limits.

The Three Standard Limits

The NCCI standard limits are written $100,000 / $500,000 / $100,000 and each number means something different - a guaranteed exam point:

Limits can be raised; many commercial buyers carry $500K/$500K/$500K or $1M/$1M/$1M to satisfy umbrella attachment requirements.

What Coverage B Actually Pays For

• Third-party-over actions (the most tested): the worker collects comp, sues an outside party, and that party drags the employer back into the suit. Example: a worker hurt by a defective forklift collects comp, sues the manufacturer, and the manufacturer files a third-party-over claim against the employer alleging poor maintenance - Part Two defends and pays within limits.
• Dual-capacity doctrine: the employer is sued in a role separate from being the employer (as a product maker, on-site medical provider, or premises owner).
• Consequential bodily injury and loss of consortium: a family member sues for their own derivative loss flowing from the worker's injury.

Key Part Two Exclusions

Part Two does not cover:

• Statutory benefits payable under Part One
• Punitive or exemplary damages
• Liability from the employer's intentional/deliberate act to injure
• Injury to a worker knowingly employed in violation of law (illegal child labor)
• Obligations under federal acts (USL&H, FELA) unless specifically endorsed

How the Limits Trigger

Walk any loss through three questions: (1) Accident or disease? A single traumatic event is 'by accident'; a condition developing from exposure over time is 'by disease.' (2) One event or the whole policy term? The 'by accident' limit applies per accident; the disease policy limit is an aggregate. (3) How many employees? The disease per-employee limit caps any one worker's disease claim.

Coverage B vs. the CGL Employee Exclusion

The standard Commercial General Liability (CGL) policy excludes bodily injury to an employee arising out of employment. Without Part Two, a third-party-over action or dual-capacity suit would fall into that CGL gap and leave the employer naked. Part Two is purpose-built to fill exactly the hole the CGL carves out.

Exam Key: Part One pays the worker the statutory benefits; Part Two pays lawsuit damages the employer owes when someone reaches the employer outside the no-fault bargain.

Worked Scenario

A delivery firm's driver is hurt when a contractor's defective loading ramp collapses. The driver collects comp benefits under Part One. He then sues the ramp manufacturer. The manufacturer files a third-party-over claim against the delivery firm, alleging its drivers overloaded the ramp. The firm's Part Two responds: it defends the firm and pays any judgment up to the $100,000 bodily injury by accident - each accident limit. None of this touches Part One, which already paid the statutory benefits and may now pursue subrogation against the manufacturer for what it paid.

Part Three and Reading the Information Page

Beyond the two operative coverages, the policy contains Part Three - Other States Insurance (the Item 3.C mechanism, detailed in 13.4) and conditions governing audit, inspection, and cancellation. The Information Page ties it together: Item 1 names the insured, Item 2 sets the policy period, Item 3.A lists primary states, Item 3.B states the Part Two limits, Item 3.C lists other states, and Item 4 sets the premium basis. A common exam error is assuming the policy responds anywhere the insured operates - it responds only where a state is shown in 3.A or 3.C.