13.2 Part One (Workers Comp) and Part Two (Employers Liability)
Key Takeaways
- The standard WC policy has two parts: Part One pays statutory benefits; Part Two pays tort damages the statute does not cover.
- Part One carries no dollar limit because the insurer pays whatever the law requires; all printed limits belong to Part Two.
- Part Two limits read accident / disease-aggregate / disease-each-employee, e.g., 100/500/100 — the middle figure is the disease aggregate.
- Third-party-over actions, consortium, and consequential injury claims are the core Part Two exposures.
Two Coverages in One Policy
The standard Workers' Compensation and Employers Liability Policy (WC 00 00 00 C), drafted by the National Council on Compensation Insurance (NCCI), contains two distinct insuring agreements:
- Part One — Workers Compensation Insurance pays the statutory benefits the law requires.
- Part Two — Employers Liability Insurance pays sums the employer becomes legally liable to pay as damages for work-related injury that fall outside the statute.
Understanding which part responds to a given fact pattern is the most heavily tested mechanic in this chapter.
Part One: Pays Whatever the Statute Requires
Part One (often called 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.
Key features:
- No policy dollar limit. Part One has no stated limit because the insurer agrees to pay whatever the statute mandates, however large.
- It pays statutory benefits only — medical, disability, rehab, death.
- The employer cannot be billed for any deductible on benefits owed to the worker; the carrier pays the worker directly.
Exam point: Part One's "limit" is the statute itself. The dollar limits printed in the policy belong to Part Two, not Part One.
Part Two: Why Employers Liability Exists
The exclusive-remedy bargain blocks most suits, but not all injury-related liability. Part Two (Coverage B) fills these gaps by paying damages the employer is legally liable for that the statute does not cover. The classic four exposures:
- Third-party-over actions — an injured worker sues a product manufacturer, who then sues the employer for contribution.
- Loss of consortium / dual-capacity suits by family members.
- Consequential bodily injury to a spouse, child, or relative of the injured worker.
- Care and loss of services claims by third parties.
Part Two covers the employer's legal liability, not statutory benefits. It is excess CGL-type coverage that exists because the WC statute leaves these specific tort exposures unaddressed.
The Three Employers Liability Limits
Part Two carries three separate limits, commonly written as $100,000 / $500,000 / $100,000:
| Limit | Trigger | Applies |
|---|---|---|
| Bodily Injury by Accident | Each accident | Per accident, all employees in one event |
| Bodily Injury by Disease — Policy Limit | Aggregate | Maximum for all disease claims in the policy period |
| Bodily Injury by Disease — Each Employee | Per worker | Maximum for any one diseased employee |
Worked trap: in 100/500/100, the middle $500,000 is the disease aggregate (policy limit), NOT a per-accident figure. The first $100,000 is per-accident BI; the last $100,000 is per-employee disease. Candidates routinely misread the middle number.
Third-Party-Over: The Signature Tested Scenario
An injured employee collects workers' comp from his employer, then sues the manufacturer of the machine that hurt him. The manufacturer files a third-party claim against the employer alleging the employer misused the equipment.
The employee cannot sue the employer directly (exclusive remedy), but the manufacturer can. This third-party-over action is the textbook Part Two claim — Part One cannot respond because the suit seeks tort damages, not statutory benefits. The employer's defense costs and any judgment fall under Coverage B, subject to the BI-by-accident limit.
What Part Two Does NOT Pay
Part Two is liability coverage, so it inherits liability-style exclusions. It will not pay:
- Statutory benefits owed to the worker — those are Part One's job.
- Liability assumed under a contract — the employer cannot shift another party's tort exposure to its WC carrier.
- Punitive damages arising from the employer's serious and willful misconduct.
- Fines or penalties for violating a statute.
- Injury to a worker knowingly employed in violation of law (e.g., an illegally employed minor).
A common exam stem describes a fact pattern and asks which part responds. Tie the test to the nature of the claim: a statutory benefit always routes to Part One, while a lawsuit for damages routes to Part Two unless an exclusion bars it.
In standard employers liability limits of $100,000 / $500,000 / $100,000, what does the middle figure of $500,000 represent?
An injured employee collects workers' comp, then sues the manufacturer of the machine that hurt him. The manufacturer brings a third-party-over action against the employer. Which coverage responds?
Part One vs. Part Two and the Third-Party-Over Claim
The Workers Compensation and Employers Liability policy contains two insuring agreements that work together:
| Coverage | Pays | Limit |
|---|---|---|
| Part One – Workers Compensation | Whatever the state statute requires — statutory benefits, no dollar limit | Unlimited (statutory) |
| Part Two – Employers Liability | Tort suits against the employer that fall outside the exclusive remedy | Stated limits (e.g., 100/500/100) |
Part One has no policy limit because it simply pays what the law mandates. Part Two exists to catch liability the no-fault bargain does not bar, and its three limits apply to: bodily injury by accident (each accident), bodily injury by disease (policy limit), and bodily injury by disease (each employee).
Third-party-over (the signature scenario): An injured employee collects workers comp from the employer, then sues a third party (a machine manufacturer). The manufacturer brings the employer into the suit for contribution, alleging the employer's negligence contributed. The employee could not sue the employer directly (exclusive remedy), but this third-party-over action reaches the employer — and Part Two Employers Liability is what responds. Expect a question describing exactly this chain and asking which coverage pays the employer's defense and contribution.