13.2 Part One (Workers Comp) and Part Two (Employers Liability)
Key Takeaways
- The standard policy is the NCCI form WC 00 00 00, containing Part One (Workers Compensation) and Part Two (Employers Liability).
- Part One has no policy limit; the insurer pays whatever the state statute requires.
- Part Two has three limits: BI by accident (each accident), BI by disease (policy aggregate), and BI by disease (each employee).
- Part Two responds to liability outside the statute: third-party-over, loss of consortium, dual-capacity, and consequential injury suits.
- Item 3.A. of the Information Page lists covered states for Part One; Item 3.B. shows Part Two limits.
The Standard Policy: WC 00 00 00
Nearly all states use the NCCI Workers Compensation and Employers Liability Insurance Policy, form number WC 00 00 00 C (the current edition). NCCI is the National Council on Compensation Insurance. The policy is unusual because it contains two distinct insuring agreements that perform two different jobs.
- Part One — Workers Compensation Insurance pays the statutory benefits the state law requires.
- Part Two — Employers Liability Insurance pays for the employer's tort liability for work-related injury that falls outside the workers comp statute.
Understand that Part One has no dollar limit—the insurer promises to pay whatever the state statute requires. Part Two is the part of the policy that carries dollar limits.
Part One — Workers Compensation
Under Part One, the insurer agrees to pay promptly all benefits required by the workers compensation law of any state listed in Item 3.A. of the Information Page (the declarations). There is no policy limit on Part One because the insurer's obligation equals the state's statutory obligation. Part One also includes the insurer's right and duty to defend and the assumption of the employer's statutory obligations.
Key trap: because Part One has no limit, candidates sometimes think the entire policy is limitless. It is not—Part Two is where limits appear.
Part Two — Employers Liability
Part Two covers the employer's legal liability for bodily injury by accident or disease that is not compensable under the workers comp statute but for which the employer can still be sued. Classic Part Two exposures:
- Third-party-over actions — an injured worker sues a third party (e.g., a machine maker), who then sues the employer for indemnity.
- Loss of consortium — a spouse sues for loss of companionship.
- Dual-capacity suits — the employer is sued in a second role (e.g., as product manufacturer).
- Consequential bodily injury to a family member.
Part Two is essentially the safety net for liability that escapes the no-fault statute.
The Three Part Two Limits
Part Two carries three separate limits, shown in Item 3.B. of the Information Page. Standard minimum limits are often written $100,000 / $500,000 / $100,000:
| Limit | Applies to | Example |
|---|---|---|
| Bodily Injury by Accident — each accident | All injury from one accident | $100,000 per accident |
| Bodily Injury by Disease — policy limit | Aggregate cap for all disease claims | $500,000 aggregate |
| Bodily Injury by Disease — each employee | Per-employee disease cap | $100,000 per employee |
Worked Example — Disease Limits
Three employees develop an occupational disease covered under Part Two. Limits are $100,000/$500,000/$100,000. Each worker's loss is $150,000.
- Per-employee cap is $100,000, so each worker is limited to $100,000.
- Three workers x $100,000 = $300,000, which is under the $500,000 disease aggregate, so all three are paid $100,000 each (total $300,000).
Why Part Two Exists: The Gaps Part One Cannot Fill
Part One (Workers Compensation) pays statutory benefits regardless of fault and has no dollar limit because it simply promises to pay whatever the state act requires. Part Two (Employers Liability) is genuine liability insurance that responds when an employer is sued in tort for a workplace injury that falls outside the no-fault system. Without Part Two, an employer would be bare against several recognized lawsuit theories the workers compensation bargain does not bar.
Four Part Two exposures are tested repeatedly. Third-party-over actions arise when an injured worker sues a manufacturer, the manufacturer impleads the employer for failing to maintain the equipment, and the employer needs liability defense. Dual-capacity suits occur when the employer is also, in a separate capacity, the maker of the product that hurt the worker. Consequential bodily injury covers a family member's claim, such as a spouse's loss of consortium or care for an injured worker. Loss to a non-employee that an employee caused while in the course of employment may also implicate the employer.
The geographic and statutory boundaries matter. Part Two covers liability for bodily injury by accident or disease that arises out of and in the course of employment and occurs in the policy territory, but it excludes liability assumed under contract, punitive damages for knowing employment of an illegal worker, and any obligation imposed by a workers compensation, occupational disease, or unemployment law (those belong to Part One).
Applying the limits: in the worked example the three workers' total of $300,000 fit under the $500,000 disease aggregate, so all were paid in full. Had ten employees each suffered $100,000 in disease, the per-employee cap would allow $100,000 each, but the $500,000 disease aggregate would stop total payment at $500,000, leaving five workers' claims unpaid by Part Two. The accident limit ($100,000 each accident) is separate and does not draw down the disease aggregate.
Key Takeaways
Part One pays unlimited statutory no-fault benefits, while Part Two is liability insurance with three limits (accident each-accident, disease aggregate, disease each-employee) that responds to tort suits the no-fault bargain does not bar, such as third-party-over, dual-capacity, and consortium claims. The disease aggregate caps total disease payouts regardless of how many employees claim, a frequent limit-application question.
Which part of the standard NCCI Workers Compensation and Employers Liability Policy has NO dollar limit?
A worker injured on the job sues the manufacturer of the machine that hurt him. The manufacturer then brings the employer into the suit seeking indemnity. Which coverage of the WC policy responds to the employer's exposure?