13.5 Workers Comp Exclusions and Endorsements

Part Two Exclusions (Employers Liability)

Part One has essentially no exclusions because it simply pays what the statute requires. The exclusions live in Part Two — Employers Liability, which behaves like a liability policy. The principal Part Two exclusions are:

• Liability assumed under contract (you cannot extend EL by agreeing to indemnify another party)
• Punitive or exemplary damages arising from injury to an illegally employed worker
• Bodily injury to an employee knowingly employed in violation of law (e.g., illegal child labor)
• Injury intentionally caused or aggravated by the insured
• Obligations under unemployment, disability benefits, or similar laws
• Injury occurring outside the United States, its territories, or Canada (unless to a U.S./Canadian citizen temporarily abroad)
• Damages payable under federal acts unless the policy is endorsed for them

Why These Exclusions Matter

Notice the pattern: Part Two excludes anything that belongs under another statutory scheme (unemployment, disability), anything the insured deserves to bear (intentional injury, illegal employment, punitive damages), and federal-act liability that needs a specific endorsement. The territorial exclusion is also a trap — domestic-only by default, with a narrow carve-back for U.S./Canadian citizens temporarily working abroad. For broader overseas exposure, an employer needs Foreign Voluntary Workers Compensation coverage, which is a separate policy.

Key Endorsements

Endorsements tailor the policy to the employer's exposures:

Voluntary Compensation vs. Employers Liability

A frequent exam contrast: Voluntary Compensation lets the insurer pay statutory-style benefits to a worker the act does not cover, so the worker is treated as if covered (no lawsuit needed). If that worker rejects the voluntary benefit and instead sues, the claim shifts to Part Two — Employers Liability. So Voluntary Comp is the "benefits" path for exempt workers, and Part Two is the "lawsuit" path.

Owners and Subrogation

By default, sole proprietors and partners are excluded (they are not "employees") and may elect in via WC 00 03 10; executive officers of corporations are included by default and may sometimes elect out where state law allows. When they are included, their payroll is counted between the state minimum and maximum payroll caps.

Subrogation lets the insurer recover from a negligent third party after paying benefits. A Waiver of Subrogation endorsement gives up that right against a specified party — commonly demanded in construction contracts — and the insurer charges additional premium because it forfeits a potential recovery.

What Workers Compensation Does Not Cover

Despite its broad no-fault reach, Part One and Part Two contain exclusions and limits the exam tests. Employers liability (Part Two) excludes liability assumed under contract, punitive damages for knowingly employing a worker in violation of law, intentional injury caused by the employer, fines under OSHA or similar safety acts, and injury to workers employed in violation of law (with the employer still owing statutory benefits). Comp does not cover injuries that do not arise out of and in the course of employment - a worker hurt commuting (the "going and coming" rule) is generally outside coverage.

Key Workers Comp Endorsements

Several endorsements adapt the policy to specific exposures: the Voluntary Compensation endorsement extends benefits to workers not subject to the comp law (executive officers exempt by statute, certain agricultural or domestic workers) so they receive comp-style benefits voluntarily; the Sole Proprietors, Partners, and Officers endorsement includes or excludes owners who would otherwise be optional; the USL&H and Maritime/Jones Act endorsements add federal exposures; and the Foreign Voluntary Compensation endorsement covers employees temporarily working abroad.

The Stop Gap (Employers Liability) endorsement supplies Part Two coverage in monopolistic states where the state fund provides only Part One.

Officer and Owner Inclusion/Exclusion

A recurring exam scenario asks whether a business owner is covered. By default, sole proprietors and partners are usually excluded from their own comp coverage (they are not "employees") but may elect in; corporate officers and LLC members are often automatically included but may elect out by endorsement, subject to state limits on how many officers can opt out. Excluding an owner lowers premium (their payroll is removed from the rating) but leaves them to rely on personal health and disability insurance for work injuries. Knowing the default treatment and the election mechanism resolves these inclusion questions.

The Going-and-Coming Rule and Serious-and-Willful Misconduct

Two recurring limits define the edges of comp coverage. Under the going-and-coming rule, injuries during an ordinary commute are not compensable because they do not arise in the course of employment, though exceptions exist for traveling employees, special errands, and employer-provided transportation. Benefits may also be reduced or denied for injuries caused by the worker's intoxication, illegal drug use, or serious-and-willful misconduct, and some states increase benefits when the employer's serious-and-willful misconduct caused the injury.

These conduct-based adjustments, along with the exclusions for intentional employer acts and statutory penalties, define what the no-fault system will and will not pay.