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

Part One: Workers Compensation

Part One is the heart of the policy. The insurer agrees to pay promptly, on the employer's behalf, all benefits required by the workers' compensation law(s) of the states listed in Item 3.A of the Information Page (the policy's declarations). Because the duty is defined by statute, Part One has no dollar limit — it pays whatever the law obligates.

Quick Answer: Part One = statutory benefits = unlimited. If the state raises benefit levels mid-term, the insurer still pays the higher amount; the policy automatically conforms to the statute.

Part Two: Employers Liability

Part Two (Employers Liability) fills the gaps. It covers the employer's legal liability for bodily injury by accident or disease arising out of employment where the injured party can sue outside the workers' comp statute. Because these are lawsuits rather than statutory benefits, Part Two carries dollar limits — written as split limits.

The standard limits are stated three ways. A common selection is 100/500/100 (in thousands):

Reading the Disease Limits

The two disease limits work together. The policy limit ($500,000 in the example) is the most the insurer pays for all disease claims combined during the policy period. The each employee limit ($100,000) caps any single diseased employee. The accident limit is per accident with no separate aggregate.

Exam trap: Candidates flip the disease aggregate and the disease each-employee numbers. In 100/500/100, the middle number is always the disease aggregate (the largest), and the last is the disease each-employee limit. Bodily injury by accident (the first number) has no aggregate.

What Part Two Actually Pays

Part Two responds to four classic suit types the statute does not reach:

• Third-party-over actions — an injured worker sues a product maker; the maker then sues the employer for contribution. The employer's exclusive-remedy shield does not stop the third party, so Part Two responds.
• Dual-capacity suits — the employer harmed the worker in a separate role (e.g., as the manufacturer of the machine that injured them).
• Consequential bodily injury — injury to a family member that flows from the worker's injury.
• Loss of consortium — a spouse's claim for loss of companionship arising from the work injury.

Worked Example: Applying Split Limits

A policy carries Employers Liability limits of 100/500/100. Over the policy year, three employees develop the same occupational lung disease and each wins a $150,000 employers-liability judgment against the employer.

• Each employee cap is $100,000, so the insurer pays $100,000 per employee, not $150,000.
• Three employees × $100,000 = $300,000 sought from the disease coverage.
• The disease policy aggregate is $500,000, so $300,000 is within it — all three are paid at the per-employee cap.
• The employer is personally exposed for the $50,000 excess on each judgment ($150,000 less $100,000).

Defense, Settlement, and Who Is an Insured

Like most liability coverages, Part Two pays defense costs in addition to the limits — investigation, defense, and appeal expenses do not erode the split limits. The insurer also has the right and duty to defend any suit seeking employers-liability damages, and may settle within the limits.

The named insured on the Information Page is the only insured under Part One. Part Two extends to legal representatives but, unlike a CGL, has no broad additional-insured machinery — that is one reason a separate CGL is still required for an employer's general operations.

Exam trap: Defense costs under Part Two are supplementary (outside the limits), so a $90,000 judgment plus $40,000 in defense does not breach a $100,000 each-accident limit.

The AOE/COE Trigger

Both parts respond only to injuries arising out of and in the course of employment (AOE/COE).

• Arising out of employment (AOE) = the injury is caused by a risk of the job.
• In the course of employment (COE) = it happened at the time, place, and while doing the work.

The going-and-coming rule generally excludes ordinary commuting (not COE), but exceptions apply when the worker is on a special errand for the employer or is paid for travel time. Off-duty recreational injuries are typically outside both prongs.

Occupational disease is treated differently from a sudden accident: it is a condition that develops gradually from repeated workplace exposure (asbestosis, hearing loss, repetitive-strain). Because the harm has no single date of injury, states set the date of disablement as the trigger and look to which insurer was on the risk at the last injurious exposure. This is precisely why Part Two separates its by accident limit from its by disease limits — the two perils behave very differently for both coverage and reserving.

Reading the Two Parts Together

The quickest way to answer a workers comp coverage item is to ask whether the claim is a statutory benefit or a lawsuit. Statutory medical, indemnity, and rehabilitation benefits flow through Part One, which has no dollar limit and conforms automatically to any mid-term benefit increase. Lawsuits the comp statute does not bar - third-party-over actions, dual-capacity, consequential injury, and loss of consortium - flow through Part Two with its split limits, where defense costs are paid in addition to the limits. Sorting the claim into benefit-versus-suit selects the part and tells you whether a dollar limit even applies.

The Grand Bargain and Exclusive Remedy

Workers compensation rests on the exclusive remedy doctrine: the employee gives up the right to sue the employer in tort in exchange for prompt, no-fault statutory benefits. This grand bargain is why ordinary employee negligence does not defeat a Part One claim and why Part Two is needed only for the narrow suits that escape the exclusive-remedy shield. When a stem describes an injured worker suing the employer directly, the answer usually turns on whether exclusive remedy bars the suit or one of the Part Two exceptions applies.