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

One Policy, Two Insuring Agreements

The standard NCCI Workers Compensation and Employers Liability Insurance Policy (form WC 00 00 00 C) contains two distinct insuring agreements. Candidates must keep them straight because they cover entirely different exposures.

• Part One — Workers Compensation Insurance (Coverage A) pays the statutory benefits the law requires.
• Part Two — Employers Liability Insurance (Coverage B) pays tort damages the employer becomes legally liable to pay for work-related injury that falls outside the comp statute.

Together they wrap the employer's entire injury exposure: the no-fault statutory layer (Part One) and the residual lawsuit layer (Part Two).

Part One: Pay Whatever the Statute Requires

Part One 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. Critical Part One features:

• No dollar limit. Part One has no policy limit — the insurer pays whatever the statute mandates, however large. (Employers liability under Part Two does carry limits.)
• No deductible on benefits to the worker; the worker never pays.
• The insurer pays promptly as benefits accrue; it cannot wait for a lawsuit.
• If the insurer is forced to pay benefits the employer should have paid, it may recover that amount from the employer (the employer reimburses the carrier).

Part Two: Employers Liability — The Limits

Part Two covers injury arising out of and in the course of employment that the comp statute does not cover, so the employee (or a third party) can sue the employer in tort. Part Two carries three separate limits, written as a slash limit such as $100,000 / $500,000 / $100,000:

The middle figure is an aggregate for disease claims, not a per-accident figure. The standard minimum limits are often 100/500/100; higher limits are available by endorsement.

The Five Exposures Part Two Handles

Part Two exists because the exclusive-remedy bargain blocks most employee suits, but not all injury-related liability. Classic tested Part Two exposures:

1. Third-party-over actions — a worker collects comp, then sues a product manufacturer; the manufacturer brings the employer in as a third party. Part Two defends the employer.
2. Consequential bodily injury — injury to a family member (e.g., a spouse's loss of consortium) flowing from the employee's injury.
3. Dual-capacity suits — employer sued in a second capacity (e.g., as product maker).
4. Care and loss of services claims by relatives.
5. Suits in states where the worker can elect to sue rather than accept comp.

What Part Two will NOT pay: any obligation already imposed by the comp statute (that is Part One), liability the employer assumed under contract, punitive damages for statutory violations, or injury outside the course of employment.

Part One — Workers' Compensation

The Workers' Compensation and Employers Liability policy contains two distinct insuring agreements. Part One — Workers Compensation is the insurer's promise to pay promptly all benefits required by the workers' compensation law(s) of the states listed in the Information Page (item 3.A). Because the obligation is statutory, Part One has no dollar limit — the insurer pays whatever the law requires. The insurer's duties include paying benefits, defending claims, and handling the administrative process; if the insurer cannot pay because of the employer's bankruptcy, the insurer remains liable to the worker.

The employer's reimbursement obligations to the insurer (for payments the law did not actually require) are also addressed here.

Part Two — Employers Liability

Part Two — Employers Liability fills the gaps that statutory workers' compensation does not cover. It pays damages for which the employer becomes legally liable because of bodily injury by accident or disease to an employee, arising out of and in the course of employment, when the claim is not covered by the workers' compensation statute. Classic Part Two exposures the exam tests include third-party-over suits (an injured worker sues a third party, who then sues the employer), consequential injury to a family member, dual-capacity claims, and loss of consortium.

Unlike Part One, Part Two carries dollar limits, shown as three figures on the Information Page: bodily injury by accident — each accident, bodily injury by disease — policy limit (aggregate), and bodily injury by disease — each employee. A standard set is $100,000 / $500,000 / $100,000. Part Two excludes liability assumed by contract, punitive damages tied to illegal employment, injury to workers employed illegally, and intentional injury. The split between unlimited Part One statutory benefits and the limited, gap-filling Part Two employers liability is a core exam distinction.

Putting Part One and Part Two Together

In practice the two parts work in tandem. When a worker is injured on the job, Part One pays the statutory benefits automatically and the worker generally cannot sue the employer — the exclusive remedy doctrine. Part Two activates only in the gap situations where the exclusive remedy does not bar a suit: a third party sued by the worker brings the employer in (the third-party-over action), a spouse claims loss of consortium, or a worker not covered by the statute pursues a common-law negligence claim.

Because Part One is unlimited and tied to the statute while Part Two has stated dollar limits, an exam question that describes a lawsuit against the employer (rather than a straightforward benefits claim) is signaling Part Two, and one describing routine statutory benefits is signaling Part One. The Information Page is the roadmap: 3.A lists Part One states, 3.B shows the Part Two limits, and 3.C lists Other States — and a state missing from both 3.A and 3.C is the classic uncovered-exposure trap.