13.2 Part One (Workers Comp) and Part Two (Employers Liability)
Key Takeaways
- The standard contract is the NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00.
- Part One (Workers Compensation) pays all statutory benefits with no dollar limit; the employer remains primarily responsible to the worker.
- Part Two (Employers Liability) covers tort suits outside the statute, such as third-party-over actions, consequential injury, and loss of consortium.
- Part Two uses a three-part split limit (e.g., $100,000/$500,000/$100,000) for accident, disease aggregate, and disease per employee.
- Disease claims are subject to both a per-employee limit and a separate policy aggregate.
The Standard Policy: WC 00 00 00
The contract private insurers use is the National Council on Compensation Insurance (NCCI) Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00 (edition 04 84). It bundles two distinct coverages you must keep separate on the exam:
| Part | Name | Function |
|---|---|---|
| Part One | Workers Compensation Insurance | Pays statutory benefits the law requires |
| Part Two | Employers Liability Insurance | Pays tort suits that fall outside the statute |
The key contrast: Part One has no dollar limit (the insurer promptly pays whatever benefits the state law mandates), while Part Two is limited by stated dollar amounts.
Part One: Workers Compensation Insurance
Under Part One, the insurer agrees to pay all benefits required by the workers compensation law of any state listed in the Information Page (Item 3.A). There is no limit of liability because the obligation is whatever the statute commands.
A critical exam point: even though the insurer pays the benefits, the employer remains primarily responsible to the worker. The insurer is essentially backstopping the employer's statutory duty. If the insurer fails to pay, the worker still has a statutory claim, and the insurer cannot use the employer's policy defenses (such as nonpayment of premium) against the injured worker — those are settled later between insurer and employer.
Part Two: Employers Liability Insurance
Part Two fills the gap when an employer faces a liability suit that the statutory benefits do not cover. It responds to bodily injury by accident or disease arising out of employment that leads to a tort claim. Classic exam triggers for Part Two:
- Third-party-over actions — a hurt worker sues a product maker, who then sues the employer for contribution.
- Consequential bodily injury — a family member's injury flowing from the worker's injury.
- Dual-capacity suits and loss of consortium claims by a spouse.
- Suits by employees not covered by the comp statute (in jurisdictions where allowed).
Part Two Limits: The Three-Limit Structure
Part Two uses a three-part limit structure that the exam tests with split-limit numbers. Standard minimum limits are often shown as $100,000 / $500,000 / $100,000:
| Limit | Applies To | Example Amount |
|---|---|---|
| Bodily Injury by Accident | Each accident, all employees in it | $100,000 each accident |
| Bodily Injury by Disease | Policy aggregate (all disease claims) | $500,000 policy limit |
| Bodily Injury by Disease | Each employee | $100,000 each employee |
Worked example: A toxic-exposure event injures three employees who later sue. The disease each-employee limit is $100,000, so the insurer pays up to $100,000 per worker, but total disease payouts cannot exceed the $500,000 disease policy aggregate. Three claims of $100,000 each = $300,000, within the aggregate. A fourth and fifth large claim could push toward the $500,000 ceiling.
The Information Page and Other Insurer Duties
The Information Page is the workers comp equivalent of a declarations page. It names the insured, lists the states in Items 3.A and 3.C, shows the Part Two limits, and states the estimated premium and classification codes. Read carefully, it tells you exactly what is covered.
Beyond paying benefits, the insurer assumes two other duties the exam tests:
- Defense — the insurer defends Part Two suits and pays defense costs in addition to the limits, so defense does not erode the dollars available for damages.
- Statutory compliance — the insurer files required forms, posts notices, and handles claim reporting with the state agency.
Trap: Defense costs under Part Two are paid on top of the limit, unlike a typical liability policy where you must check whether defense is inside or outside the limit.
Which statement correctly distinguishes Part One from Part Two of the standard NCCI workers compensation policy?
A chemical leak injures four employees who later sue under bodily injury by disease. The Part Two limits are $100,000/$500,000/$100,000. Each proves $100,000 in damages. How much does the insurer pay in total?
Part One vs. Part Two - The Core Distinction
The single most-tested workers comp concept is the split between the two parts of the standard policy. Part One is statutory and unlimited; Part Two has dollar limits and fills the gap when an injury falls outside the comp statute.
| Feature | Part One - Workers Comp | Part Two - Employers Liability |
|---|---|---|
| What it pays | Statutory benefits to injured workers | Damages from employee lawsuits |
| Limit | No dollar limit (pays whatever the law requires) | Stated limits (e.g., 100/500/100) |
| Fault | No-fault | Based on employer negligence |
| Typical trigger | Covered injury/disease | Third-party-over, consortium, dual-capacity claims |
The three-limit structure of Part Two reads as bodily injury by accident, each accident / bodily injury by disease, policy limit / bodily injury by disease, each employee - commonly $100,000 / $500,000 / $100,000.
Exam Trap: Part Two responds to suits the exclusive remedy does not bar - such as a third-party-over action (an injured worker sues a machine maker, who then sues the employer) and loss of consortium by a spouse. Part One never has a dollar cap; only Part Two does.
Reading the Part Two Limits and the Third-Party-Over Suit
Part Two limits are written as three figures, and the exam asks you to apply each.
| Part Two limit (e.g., 100/500/100) | Applies to |
|---|---|
| $100,000 each accident | All BI by accident in one accident |
| $500,000 policy limit | Aggregate for BI by disease, all employees |
| $100,000 each employee | BI by disease, per individual employee |
Exam Trap: Part Two responds to a third-party-over action: an injured employee sues a third party (a machine maker), who then sues the employer for indemnity. The employee's direct claim is barred by exclusive remedy and paid under Part One, but the third party's suit against the employer is a tort claim paid under Part Two, which is why both parts are needed.