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

Part One — Coverage A (Workers Compensation)

Part One is the insurer's promise to pay, on the employer's behalf, the benefits required by the workers compensation law of any state listed in Item 3.A of the Information Page. Its defining trait is that there is no dollar limit — whatever the statute commands, the insurer pays, even a multimillion-dollar catastrophic claim.

Exam Key: Part One has no limit because the obligation is set by statute, not by the contract. Contrast Part Two, which always carries dollar limits.

The insurer also enjoys a unique right of direct reimbursement: if the law requires the employer to make a payment the policy would not otherwise cover, the carrier pays it and the employer must reimburse the carrier. This keeps the carrier's promise to the state airtight.

Part Two — Coverage B (Employers Liability)

Part Two fills the gap left by the exclusive-remedy rule. Most injuries go through Part One, but some claims escape the comp system and become tort suits against the employer. Part Two responds to those, subject to limits.

The four classic Part Two exposures the exam tests are:

• Third-party-over actions — an injured worker sues a third party (e.g., a machine maker); that third party then sues the employer for contribution.
• Consequential bodily injury — injury to a family member that flows from the worker's injury (e.g., a spouse's care-related harm).
• Dual-capacity suits — the employer is sued in a second capacity (e.g., as the manufacturer of the product that hurt its own employee).
• Loss of consortium — a spouse's claim for loss of companionship.

Part Two Limits — The Three-Limit Structure

Part Two uses three separate limits, shown on the Information Page in Item 3.B. A common default set is $100,000 / $500,000 / $100,000:

Worked example: A boiler explosion injures three workers in one accident, and the suits total $260,000. The "by accident" limit is per accident, not per person, so the most Part Two pays is $100,000 for the entire event — the employer is exposed for the $160,000 excess.

Disease example: Eight employees develop an occupational disease over the policy term, each with a $90,000 suit ($720,000 total). The $100,000 each-employee limit covers each individual claim fully, but the $500,000 disease aggregate caps the total — so Part Two pays $500,000 and stops, leaving $220,000 uninsured.

Defense Costs

Under Part Two, defense costs are paid in addition to the limits — they do not erode the $100k/$500k/$100k amounts. The insurer also has the right and duty to defend any covered suit.

How a Tort Suit Escapes the Comp System

Part Two only matters because the exclusive-remedy rule is not airtight. The exam wants you to recognize the precise routes by which an employer can still be sued:

• Third-party-over action — the worker sues an outside party (e.g., a defective-press maker), who then sues the employer for contribution. The employer's defense and contribution fall on Part Two.
• Dual-capacity — the employer wears a second hat. If the employer also manufactured the product that hurt its worker, the worker may sue it as a manufacturer, sidestepping the comp bar.
• Consequential injury and consortium — family-member claims. A spouse's loss-of-consortium claim is not the worker's comp claim, so it is a Part Two tort exposure.

These are the only doors out of the exclusive-remedy room, and the exam expects you to name the door a given fact pattern walks through. Notice that in every case the employer — not the worker — is the defendant, which is why this is liability coverage rather than statutory benefits.

Reading the Information Page for Part Two

Part Two limits live in Item 3.B of the Information Page. The exam frequently shows three numbers — e.g., $100,000 / $500,000 / $100,000 — and asks you to apply the correct one.

Exam Key: "By accident" is per accident (not per person), and the disease aggregate is the outer cap that stops paying once exhausted. Mixing these up is the single most common Part Two mistake.

Second worked example: Five employees develop the same occupational lung disease over the term, each with a $120,000 claim. The each-employee limit ($100,000) caps each claim, so each pays $100,000 — but five claims would be $500,000, exactly the disease aggregate. Part Two pays $500,000 total and stops; the per-employee $20,000 shortfalls plus any sixth claim are uninsured.

Why the Two Parts Coexist

A single event can trigger both parts. Imagine a worker injured by a machine: Part One pays the worker's statutory medical and disability benefits with no limit. The worker then sues the machine's maker, who brings the employer into the suit (third-party-over). That contribution claim against the employer is a Part Two loss, subject to the $100,000 by-accident limit. The carrier therefore writes one check stream under Part One (to the worker) and defends a separate liability action under Part Two (against the employer) — two coverages, one accident.

Exam Key: When a fact pattern mentions a lawsuit against the employer, look to Part Two; when it mentions benefits the state requires, look to Part One. The presence of a tort suit is the tell.