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

The WC 00 00 00 Policy

The standard policy is the Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00 C, drafted by the NCCI (National Council on Compensation Insurance) and used in most states. Unlike ISO commercial forms, the WC policy has no single overall limit for its statutory part. Memorize its structure — the exam tests the difference between Part One and Part Two relentlessly.

The policy contains:

• Part One — Workers Compensation Insurance
• Part Two — Employers Liability Insurance
• Part Three — Other States Insurance (covered in 13.4)
• Part Four — Your Duties If Injury Occurs
• Part Five — Premium
• Part Six — Conditions

The Information Page (the WC equivalent of a declarations page) lists the named insured, the states in Item 3.A, other states in Item 3.C, the Part Two limits, and the classification/payroll/rate data used to compute premium.

A second structural feature worth memorizing: the workers compensation law of each listed state is treated as part of the policy as if written into it. Because of this, if a state legislature raises a benefit during the term, the WC policy automatically pays the higher amount with no endorsement needed — a direct consequence of Part One having no fixed dollar limit. The insurer also cannot cancel mid-term in a way that leaves the statutory obligation unfunded without following the state's strict cancellation-notice rules, which often require notice to the state regulator as well as the insured.

Part One — Workers Compensation

Part One promises to pay promptly when due the benefits required of the insured by the workers compensation law of any state listed in Item 3.A of the Information Page. The single most-tested feature:

Part One has NO dollar limit. The insurer pays whatever the state statute requires — there is no policy maximum.

This is logical: because benefits are set by statute, the insurer simply funds the statutory obligation. Part One responds when the employer is legally obligated under the workers compensation statute, which is a no-fault obligation requiring no proof of negligence. Part One also includes the insurer's right and duty to defend and, importantly, the workers compensation law is deemed part of the policy — so a statutory benefit increase automatically applies.

Part Two — Employers Liability

Part Two fills gaps where an employee (or related party) sues the employer for a work-related injury outside the statutory benefit system. It functions like liability coverage and therefore does carry limits. Part Two responds to claims such as:

• Third-party-over actions — an injured worker sues a product manufacturer, who then sues the employer.
• Consequential bodily injury — injury to a spouse/relative consequent on the worker's injury.
• Loss of consortium claims by a worker's family member.
• Dual-capacity suits.

Standard Part Two Limits

The customary minimum limits are written as bodily injury by accident / by disease policy limit / by disease each employee, commonly:

This classic set is read aloud as "100/500/100." The accident limit is per accident (no aggregate); the disease policy limit is an aggregate cap on all disease claims.

Worked Numeric — Part Two Disease Aggregate

A contractor carries Part Two limits of 100/500/100. Over the policy year, six employees develop the same occupational disease, and a third-party-over action assigns the employer $90,000 of employers-liability damages per employee.

• Each-employee limit ($100,000) is satisfied: $90,000 each is paid.
• But 6 x $90,000 = $540,000, which exceeds the $500,000 disease policy aggregate.
• The insurer pays only $500,000 total for all disease claims combined; the remaining $40,000 is uninsured.

Contrast: had these been six separate accidents, the $100,000 by-accident limit applies per accident with no aggregate, so each could be paid up to its own limit.

Part One vs. Part Two — The Core Distinction

How the Parts Work Together

Most workplace injuries are paid entirely under Part One — the worker files a claim, the insurer funds statutory benefits, and there is no lawsuit. Part Two only activates when someone pierces the exclusive-remedy wall.

The exam's favorite scenario is the third-party-over action: a worker injured by a defective machine collects Part One benefits, then sues the machine maker; the machine maker, claiming the employer was partly at fault for poor maintenance, sues the employer for contribution. The statute bars the worker from suing the employer directly, but it does not bar the third party — so Part Two responds to the employer's resulting liability, subject to its limits.

Remember that defense costs under both parts are generally paid in addition to the limits, and the insurer controls the defense. A worker cannot waive the employer's statutory duty, so settlements of Part One claims often require state workers compensation board approval before they are final.