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

Part One — Workers Compensation Insurance

Part One (Coverage A) is the heart of the policy. The insurer agrees to pay promptly all benefits required of the insured by the workers compensation law of any state listed in Item 3.A of the Information Page. Two features make Part One unique among P&C coverages:

• No dollar limit. The insurer pays whatever the listed state's statute requires — there is no policy limit because the obligation is defined entirely by the state act.
• The state law is the measuring stick. If the statute increases benefits, the insurer pays the higher amount; the policy automatically conforms to changes in the law.

Part One also contains the critical third-party reimbursement rule: if the insurer pays benefits the insured was not legally obligated to pay under the act (for example, because the worker was not actually covered), the insured must reimburse the insurer. This protects the carrier from paying voluntary or non-statutory amounts on the employer's behalf.

Part One handles the statutory, scheduled side of work injury — fixed benefits, no negligence question, no lawsuit. It does not respond to lawsuits or to injuries that fall outside the comp act. Those gaps are exactly what Part Two fills.

Part Two — Employers Liability Insurance

Part Two (Coverage B) functions like a liability policy. It pays damages the employer becomes legally liable to pay because of bodily injury by accident or disease arising out of and in the course of employment — but only for situations the comp act does not cover. Because it pays damages (not scheduled benefits), Part Two has limits, shown on the Information Page. The standard limits are commonly written:

• Bodily Injury by Accident — $100,000 each accident
• Bodily Injury by Disease — $500,000 policy limit (aggregate)
• Bodily Injury by Disease — $100,000 each employee

The "by disease" limits are split: the policy limit is the most the insurer pays for disease for the entire policy period, while the each employee limit caps any one diseased worker.

What Part Two Actually Covers

Part Two responds to several special suits that Part One cannot reach:

• Third-party-over actions — an injured worker sues a third party (e.g., a machine maker); that third party then sues the employer claiming the employer was partly at fault. Part Two defends the employer.
• Consequential bodily injury — a family member's injury that flows from the worker's injury (e.g., a spouse's loss-of-consortium suit).
• Dual-capacity suits and care/loss-of-services claims by a spouse, child, or parent.
• Injury in a state where the employer was not required to provide comp, so no Part One benefit applied.

Quick Worked Comparison

Suppose a contractor's policy shows Part Two limits of $100,000 / $500,000 / $100,000. A defective-product lawsuit results in a third-party-over judgment against the employer of $140,000 for a single accident. Part One pays nothing (it is a liability damages claim, not a statutory benefit), and Part Two pays its $100,000 each-accident limit; the remaining $40,000 is uninsured under this policy unless an umbrella/excess employers liability policy sits above it.

This is a classic exam trap: do not assume Part Two is "unlimited" like Part One — Part Two always has the three split limits.

Part One - Workers Compensation

The standard Workers Compensation and Employers Liability Policy has two distinct insuring agreements. Part One (Workers Compensation) promises to pay all benefits required by the workers compensation law of the states listed in the policy. There is no dollar limit on Part One because the obligation is set by statute, not by the policy - the insurer simply pays whatever the law requires. Part One is the statutory, no-fault heart of the policy and applies automatically to the states named in Item 3.A of the declarations.

Part Two - Employers Liability

Part Two (Employers Liability) covers the employer's liability for work-related bodily injury that falls outside the workers comp statute - lawsuits that escape the exclusive-remedy bar. Classic Part Two claims include third-party-over actions (a hurt worker sues a product maker, who then sues the employer), consequential bodily injury to a family member, dual-capacity suits, and loss of consortium. Unlike Part One, Part Two does carry dollar limits (commonly stated as bodily injury by accident per accident, by disease policy limit, and by disease each employee - the "100/500/100" style).

Part Two is liability coverage; Part One is statutory benefit coverage.

Part Three and Monopolistic States

Part Three (Other States Insurance) extends Part One coverage to states the insured may expand into, listed in Item 3.C of the declarations, preventing a gap when operations cross state lines mid-term.

Several states are monopolistic (the state fund is the only source of workers comp - historically including North Dakota, Ohio, Washington, and Wyoming), where employers buy comp from the state fund rather than a private insurer, and employers liability must then be bought separately via a Stop Gap endorsement on the CGL because Part Two is unavailable from the monopolistic fund.

This monopolistic/stop-gap distinction is heavily tested and is directly relevant to North Dakota.