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

One Policy, Two Parts

The standard contract sold by private insurers is the National Council on Compensation Insurance (NCCI) Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00. Two operative parts must stay straight for the exam:

Part One Pays Whatever the Statute Requires

Part One (Coverage A) 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 feature is that there is no dollar limit. Whatever the statute commands, including a multi-million-dollar catastrophic spinal claim, the insurer pays.

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

States the employer expects to operate in but that are not yet on the policy at inception are handled by the Other States Insurance of Part Three (covered in 13.4). States with monopolistic funds can never be listed in Item 3.A of a private policy.

Part Two: The Three Standard Limits

The exclusive remedy bargain blocks most employee suits, but not all injury-related liability. Part Two (Coverage B) pays sums the employer is legally obligated to pay as damages for a covered work injury when the comp statute does not bar the action. It is true liability insurance, so it has limits. The NCCI standard limits read $100,000 / $500,000 / $100,000, and each number is different:

Limits can be raised; many buyers carry 500K/500K/500K or 1M/1M/1M, often to satisfy an umbrella's required underlying limit.

What Coverage B Actually Pays

• Third-party-over actions: the worker collects comp, sues an outside party (such as a machine maker), and that party drags the employer back in for contribution or indemnity.
• Dual-capacity suits: the employer is sued in a separate role, such as a product manufacturer, an on-site medical provider, or a building landlord.
• Consequential injury and loss of consortium: a family member sues for their own derivative loss flowing from the worker's covered injury.

Key Part Two Exclusions

Part Two does not pay:

• 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 (e.g., illegal child labor)
• Obligations under federal acts (USL&H, FELA) unless specifically endorsed

How the Limits Trigger

Walk the facts through three questions: accident or disease, one event or the whole term, and how many employees.

Monopolistic States and Stop Gap

In the four monopolistic states (Ohio, North Dakota, Washington, Wyoming) the state fund sells Coverage A only, not Coverage B. The fix is stop-gap coverage, an employers-liability endorsement added to the employer's Commercial General Liability (CGL) policy. This matters because the standard CGL excludes bodily injury to an employee arising out of employment, so without Part Two or a stop-gap endorsement a third-party-over or dual-capacity suit would fall into an uninsured gap.

Exam Key: Part One pays the worker statutory benefits with no limit; Part Two pays lawsuit damages, within limits, when someone reaches the employer outside the no-fault bargain.

Part One vs. Part Two Limits

The standard contract is the NCCI Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00), and the exam hinges on the difference between its two parts:

Part One has no limit because the insurer simply pays the benefits the listed state's act mandates, however large. Part Two is true liability insurance with stated limits. The three Part Two figures mean: bodily injury by accident, each accident ($100,000); bodily injury by disease, policy aggregate ($500,000); and bodily injury by disease, each employee ($100,000).

What Part Two (Employers Liability) Actually Covers

If comp is the exclusive remedy, why is Part Two needed at all? Because several suits fall outside the statutory benefit system yet still target the employer:

• Third-party-over actions - an injured worker sues a product maker, who then sues the employer for contribution.
• Dual-capacity suits - the employer is sued in a second capacity (as manufacturer or landlord).
• Consortium / consequential claims - a spouse or family member sues for loss of companionship or services.
• Care and loss of services of the injured employee.

In monopolistic states (Ohio, North Dakota, Washington, Wyoming), the state fund provides only the statutory benefits and omits Coverage B, so employers must add stop-gap employers liability coverage to their CGL to fill the Part Two gap. Recognizing that monopolistic-state employers need stop-gap coverage is a recurring exam point.