13.2 Part One (Workers Comp) and Part Two (Employers Liability)
Key Takeaways
- The standard NCCI policy (form WC 00 00 00) has Part One (statutory workers' compensation, unlimited) and Part Two (employers liability, limited)
- Part One pays whatever the workers' compensation law of any state listed in Item 3.A requires—there is no policy dollar limit
- Part Two standard limits are $100,000 bodily injury by accident each accident / $500,000 bodily injury by disease policy limit / $100,000 bodily injury by disease each employee
- Part Two responds to lawsuits outside the comp statute—third-party-over actions, dual-capacity claims, consequential injury, and loss of consortium
- Coverage requires injury arising out of and in the course of employment (AOE/COE); the coming-and-going rule excludes ordinary commutes unless an exception applies
The Standard Policy: Two Coverages, One Contract
Private insurers issue the NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00. Despite one policy jacket, it contains two distinct coverages that respond to different triggers:
| Policy part | Common name | What it pays | Dollar limit |
|---|---|---|---|
| Part One | Workers' Compensation (Coverage A) | Statutory comp benefits the state act requires | Unlimited |
| Part Two | Employers Liability (Coverage B) | Damages from lawsuits outside the comp statute | Limited |
Exam key: Part One has no policy limit because the obligation is fixed by statute. Part Two always carries stated dollar limits shown in Item 3.B of the Information Page.
Part One: Statutory Benefits Without a Cap
Part One is the insurer's promise to pay, on behalf of the employer, all benefits required by the workers' compensation law of any state listed in Item 3.A. Whether the claim costs $5,000 or $5 million, the insurer pays whatever the statute commands.
Before Part One responds, the injury must arise out of and in the course of employment (AOE/COE)—the two-part test every comp claim must satisfy:
- Arising out of — a causal connection between employment and the injury (risk of the job)
- In the course of — injury occurs within the time, place, and circumstances of employment
The Coming-and-Going Rule
The most-tested AOE/COE application is the coming-and-going rule: an ordinary commute between home and a fixed workplace is not in the course of employment. A crash driving to the office on a normal workday is usually not compensable.
| Situation | Typically covered? |
|---|---|
| Ordinary commute to fixed workplace | No |
| Special errand at employer's direction during commute | Often yes |
| Traveling employee (sales rep on the road) | Often yes |
| Employer-provided transportation | Often yes |
| Injury in employer's parking lot on premises | Often yes (parking-lot rule) |
Part Two: Why Employers Liability Exists
The exclusive remedy bargain blocks most employee negligence suits—but not every injury-related lawsuit. Part Two (Coverage B) pays sums the employer becomes legally obligated to pay as damages for covered bodily injury when the comp statute does not bar the action.
Part Two is true liability insurance: it defends the employer and pays judgments up to the policy limits.
The Three Standard Limits
NCCI standard limits appear as $100,000 / $500,000 / $100,000. Each number tests a different concept:
| Limit | Label | Applies to |
|---|---|---|
| $100,000 | Bodily injury by accident — each accident | Per-accident cap for traumatic injury |
| $500,000 | Bodily injury by disease — policy limit | Aggregate for all disease claims in the policy term |
| $100,000 | Bodily injury by disease — each employee | Per-employee cap for occupational disease |
Buyers often increase limits to $500K/$500K/$500K or $1M/$1M/$1M to satisfy umbrella attachment requirements.
What Part Two Actually Covers
- Third-party-over actions (heavily tested): Worker collects comp, sues an outside party, and that party impleads the employer. Example: a driver hurt by a defective pallet collects comp, sues the pallet manufacturer, and the manufacturer claims the employer improperly stored the pallets—Part Two defends and pays within limits.
- Dual-capacity doctrine: Employer is sued in a role separate from being the employer—as product manufacturer, premises owner, or on-site medical provider.
- Consequential bodily injury: A family member suffers a physical injury flowing from the worker's comp injury.
- Loss of consortium: A spouse sues for loss of companionship or services.
Key Part Two Exclusions
Part Two does not cover:
- Statutory benefits payable under Part One
- Punitive or exemplary damages
- Liability from the employer's intentional act to injure
- Injury to a worker knowingly employed in violation of law (illegal child labor)
- Obligations under federal acts (USL&H, FELA) unless specifically endorsed
How the Limits Trigger: A Decision Framework
Walk every Part Two loss through three questions:
- Accident or disease? A single traumatic event is "by accident"; a condition developing over time from workplace exposure is "by disease."
- One event or entire policy term? The accident limit applies per event; the disease policy limit is an aggregate.
- How many employees? The disease per-employee limit caps any one worker's disease claim.
| Loss scenario | Limit tested |
|---|---|
| One worker injured in a fall; third-party-over suit against employer | $100,000 accident — each accident |
| Five workers develop lung disease from shared solvent exposure | $500,000 disease — policy aggregate |
| One of those five workers, examined alone | $100,000 disease — each employee |
Part Two Versus 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. Part Two is purpose-built to fill exactly the hole the CGL carves out.
Reading the Information Page
The Information Page ties the policy together:
| Item | Contents |
|---|---|
| Item 1 | Named insured, address, legal status |
| Item 2 | Policy period |
| Item 3.A | States where employer operates at inception—Part One applies fully |
| Item 3.B | Part Two employers liability limits |
| Item 3.C | Other States Insurance (section 13.4) |
| Item 4 | Premium basis: classifications, rates, estimated payroll |
A common exam error assumes the policy responds anywhere the insured operates. It responds only where a state appears in Item 3.A or Item 3.C (with monopolistic-state exceptions covered in section 13.4).
Worked Scenario
A roofing subcontractor's employee is injured when a general contractor's scaffold collapses. The employee collects Part One statutory benefits. He sues the general contractor for negligence. The contractor files a third-party-over claim against the subcontractor, alleging improper tie-off procedures.
- Part One already paid the worker's comp benefits and may pursue subrogation against the general contractor.
- Part Two defends the subcontractor and pays any judgment against it, up to the $100,000 bodily injury by accident — each accident limit.
Memory aid: Part One pays the worker what the statute requires. Part Two pays lawsuit damages when someone reaches the employer outside the no-fault bargain.
Which statement correctly distinguishes Part One (Coverage A) from Part Two (Coverage B) of the standard workers' compensation policy?
An employee is injured in a single fall at a job site. A third party later sues the employer in a third-party-over action. Which Part Two limit applies?
An office worker is injured in a car crash while driving from home to her regular workplace on a normal workday, with no special employer errand. Under the coming-and-going rule, is the injury compensable?
Why does the standard workers' compensation policy include Part Two employers liability coverage?