13.2 Part One (Workers Comp) and Part Two (Employers Liability)
Key Takeaways
- The standard policy is NCCI form WC 00 00 00; Part One (Coverage A) is unlimited statutory benefits, Part Two (Coverage B) is limited employers liability.
- Part One applies in states listed in Item 3.A and requires the injury to arise out of and in the course of employment (AOE/COE); the coming-and-going rule excludes ordinary commutes.
- Standard Part Two limits are $100,000 by accident / $500,000 disease aggregate / $100,000 disease per employee.
- Coverage B pays third-party-over actions, dual-capacity suits, and derivative claims, but never Part One benefits, punitive damages, or intentional injury.
- Part Two exists to fill the CGL's employee bodily-injury exclusion; the comp insurer has subrogation against third parties who caused the injury.
Two Parts of One Policy
The standard contract sold by private insurers is the National Council on Compensation Insurance (NCCI) Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00. It has two operative parts the exam expects you to keep straight:
| Policy Part | Common Name | What It Does | Limit |
|---|---|---|---|
| Part One | Workers Compensation (Coverage A) | Pays statutory benefits the law requires | Unlimited |
| Part Two | Employers Liability (Coverage B) | Pays injury-related lawsuit damages outside the statute | Limited |
Exam Key: Part One has no dollar limit because the obligation is set by statute, not by the contract. Part Two always carries dollar limits because it is true liability insurance.
Part One — Coverage A
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. Whatever the statute commands — a $4 million catastrophic spinal claim included — the insurer pays. There is no aggregate.
Before any benefit is owed, the injury must arise out of and in the course of employment (AOE/COE):
- Arising out of employment (AOE): a causal link — the work created or increased the risk
- In the course of employment (COE): the right time, place, and circumstance — the worker was doing the job
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 the office is usually not compensable. Exceptions that restore coverage: a special errand/mission, a traveling employee (no fixed site), employer-provided transport, and the premises rule (injury in the employer's lot or grounds).
Occupational Disease and Subrogation
Part One pays for occupational diseases — conditions that develop over time from job exposure (hearing loss, repetitive-motion injuries, certain respiratory illnesses) — not just sudden accidents. These claims hinge on linking the disease to a work exposure greater than the public faces, and they may surface long after exposure, which is why Part Two carries separate "by disease" limits.
When a third party caused the injury (a negligent driver, a defective-product maker), the comp insurer that paid benefits has subrogation rights: it may recover what it paid out of any recovery the worker obtains from that third party. This prevents a double recovery and is the flip side of the third-party-over actions handled under Part Two.
Part Two — Coverage B (Employers Liability)
The exclusive remedy bargain blocks most employee suits, but not all injury-related liability. Part Two 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. It is true liability insurance — it has limits.
The NCCI standard limits are written as $100,000 / $500,000 / $100,000, and each number means something different — a guaranteed exam point:
| Limit | Label | Applies To |
|---|---|---|
| $100,000 | Bodily Injury by Accident — Each Accident | Per-accident cap for injury by accident |
| $500,000 | Bodily Injury by Disease — Policy Limit | Aggregate for all disease claims |
| $100,000 | Bodily Injury by Disease — Each Employee | Per-employee cap for disease |
Limits can be raised; many commercial buyers carry $500K/$500K/$500K or $1M/$1M/$1M to satisfy umbrella attachment requirements.
What Coverage B Pays For
1. Third-party-over actions (the most-tested scenario):
- Worker hurt by a defective forklift; collects workers' comp
- Worker sues the forklift manufacturer (a third party — not barred by exclusive remedy)
- Manufacturer files a third-party-over claim against the employer, alleging poor maintenance/training
- Coverage B defends the employer and pays any damages within limits
2. Dual-capacity doctrine — the employer is sued in a role separate from being the employer (product manufacturer of the item that hurt its own worker; on-site medical clinic; landlord of premises it owns).
3 & 4. Consequential bodily injury and loss of consortium — a family member sues for their own derivative loss flowing from the worker's injury (a spouse's loss of companionship and services).
Coverage B does NOT pay: statutory benefits payable under Part One; punitive/exemplary damages; liability from the employer's intentional act to injure; injury to a worker knowingly employed in violation of law (illegal child labor); or federal-act obligations (USL&H, FELA) unless specifically endorsed.
Why Part Two Exists: 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.
Which limit triggers? Walk the facts through three questions:
| Loss | Limit Tested | Why |
|---|---|---|
| One worker hurt in a fall, third-party-over suit | $100,000 by accident — each accident | Single traumatic event |
| Five workers develop lung disease from a solvent | $500,000 disease policy limit | Aggregate across all disease claims |
| One of those five, examined alone | $100,000 disease — each employee | Per-employee disease cap |
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.
In the standard employers liability limits of $100,000 / $500,000 / $100,000, what does the middle figure of $500,000 represent?
Which of the following would Part Two (Employers Liability) NOT pay?