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

The Standard Policy: NCCI WC 00 00 00 C

Most states use the Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00 C, filed by the National Council on Compensation Insurance (NCCI). (Several large states - California, New York, Pennsylvania - use independent bureaus, but the policy architecture is the same.) The policy is built around an Information Page (the declarations) and several lettered Parts. The two most tested are Part One and Part Two.

Part One - Workers Compensation Insurance

Part One is the statutory coverage. The insurer promises to pay promptly when due all benefits required by the WC law of any state listed in Item 3.A of the Information Page. Key features:

• No dollar limit - the insurer pays whatever the statute requires.
• Benefits are defined by statute, not by the policy.
• The insurer cannot use the employer's defenses against the worker.

Because the obligation is statutory, Part One has no per-accident or aggregate limit - the law sets the amounts.

Part Two - Employers Liability Insurance

Part Two fills gaps where an employee (or a third party) sues the employer in tort rather than collecting statutory benefits - situations WC's exclusive remedy does not bar. Classic triggers:

• Third-party-over actions - a manufacturer sued by the worker then sues the employer.
• Consequential bodily injury to a family member of the injured worker.
• Dual-capacity suits (employer also acted as product maker).
• Loss of consortium claims by a spouse.

Unlike Part One, Part Two has dollar limits stated as a three-part split.

Part Two Split Limits

The Employers Liability limits appear in Item 3.B as three numbers:

Standard minimum limits are commonly written as $100,000 / $500,000 / $100,000 ($100K each accident, $500K disease policy limit, $100K disease each employee). Higher limits can be purchased.

Exam trap: the each accident limit covers injury; the each employee and policy limit numbers both relate to disease.

Worked Example - Employers Liability Limits

Limits are $100,000 / $500,000 / $100,000. A defective machine injures three employees by accident in one explosion, generating a single third-party-over liability suit. Part Two pays up to $100,000 for that one accident (the Bodily Injury by Accident limit), regardless of how many workers were hurt, because it is a per-accident limit - not per person.

The Information Page and the Other Policy Parts

The Information Page (declarations) is the heart of the policy. Item 1 names the insured; Item 3.A lists states where Part One applies; Item 3.B states the Part Two limits; Item 3.C lists Other States (Part Three); and Item 4 describes the rating/premium basis. Beyond Parts One and Two, the policy contains:

• Part Three - Other States Insurance (covered in 13.4).
• Part Four - Your Duties If Injury Occurs (prompt notice, cooperation).
• Part Five - Premium (audit, payroll basis, classifications).
• Part Six - Conditions (inspection, cancellation, transfer of rights).

Why Part Two Is Needed - Closing the Gap

Exclusive remedy bars an employee from suing the employer, but it does not bar everyone. Part Two responds when liability survives that bar. The most tested example is the third-party-over action: an injured worker (1) collects WC benefits, (2) sues a negligent third party such as a machine maker, and (3) that third party sues the employer for contribution, claiming the employer's negligence contributed. The employee cannot sue the employer directly, but the third party can - and Part Two pays the employer's defense and damages, subject to the Item 3.B limits.

Defense Costs and Trigger

Like other liability coverages, Part Two pays defense costs in addition to the limits, and the insurer has the duty to defend suits seeking covered damages, even groundless ones. Coverage is triggered by bodily injury by accident that occurs during the policy period, or bodily injury by disease where the worker's last day of exposure falls within the policy period. The accident limit is applied per accident no matter how many employees are hurt, while the disease aggregate caps all disease claims for the entire policy term combined.

Reading a Sample Information Page

Suppose Item 3.A lists "New Hampshire", Item 3.B shows $100,000 / $500,000 / $100,000, and Item 3.C says "all states except ND, OH, WA, WY and any state in 3.A." From this single page you can answer most policy questions: statutory benefits flow under Part One for New Hampshire; a third-party-over suit is capped at $100,000 per accident under Part Two; and an incidental job in Maine is picked up by Part Three because Maine is neither a 3.A state nor monopolistic. A claim in Ohio, however, is not covered - Ohio is monopolistic and excluded - so the employer must use the Ohio state fund.

Other States vs. Worldwide Misconceptions

A frequent error is assuming Part Two follows the worker anywhere. In reality, Part Two's coverage territory mirrors the standard policy - the U.S., its territories, and Canada - and an employee permanently abroad needs Foreign Voluntary Compensation instead. Another misconception is that Part Two pays the same statutory benefits as Part One; it does not. Part One pays the schedule of benefits set by law, while Part Two pays tort damages a court awards (including pain and suffering and consortium), subject to the 3.B dollar limits. Keeping these two payment mechanisms distinct is essential on the exam.