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

The standard NCCI policy

For private-market business, almost every state uses the NCCI Workers Compensation and Employers Liability Insurance Policy (form WC 00 00 00 C). The policy is unusual because it has two very different insuring agreements bundled into one contract: Part One (the statutory benefits) and Part Two (a true liability coverage). Understanding the split is the single most-tested concept in this domain.

Part One — Workers Compensation

Part One says the insurer will pay promptly all benefits required by the workers compensation law of any state listed in Item 3.A. of the Information Page. Key features:

• No dollar limit. Part One has no policy limit because the obligation is whatever the state statute requires — medical is unlimited and indemnity follows the state schedule.
• The insurer's duty is defined by statute, not by the policy's own dollar figures.
• If the insurer pays benefits it did not owe (because the law did not require them), the insured must reimburse the insurer.

Part One is essentially the insurer stepping into the employer's statutory shoes.

Why Part One has no limit

New producers often look for a Part One limit on the Information Page and cannot find one — by design. Because the employer's obligation is whatever the state statute mandates, the policy promises to mirror that obligation without capping it in dollars. If the legislature raises benefit levels mid-term, the insurer's Part One promise rises with the law.

This is also why medical benefits are first-dollar and unlimited: there is no deductible, no coinsurance, and no aggregate. Contrast this with a health plan. The only Part One 'limits' are the statutory schedules themselves (e.g., a scheduled number of weeks for loss of a thumb), which come from the law, not the policy.

Part Two — Employers Liability

Part Two is a liability coverage that pays for bodily injury by accident or disease for which the employer is legally liable but that falls outside the workers compensation statute. It fills the gaps the no-fault system does not reach. Classic Part Two exposures:

• Third-party-over actions — an injured worker sues a manufacturer, who then sues the employer for contribution.
• Consequential bodily injury — injury to a spouse or family member (e.g., loss of consortium).
• Dual-capacity suits — the employer is sued in a non-employer role (e.g., as product manufacturer).
• Loss of services of the injured employee.

Part Two has dollar limits shown on the Information Page (Item 3.B.).

The Part Two limit structure

Employers Liability uses three limits, often written as a split such as $1,000,000 / $1,000,000 / $1,000,000 (a common upgrade from the standard $100,000/$500,000/$100,000):

Trap: the accident limit is per accident (regardless of number of employees), while the disease limits are split into a per-policy aggregate AND a per-employee cap. Standard limits are $100,000 each accident / $500,000 disease policy limit / $100,000 disease each employee.

Worked Part Two example

Part Two limits are $100,000 / $500,000 / $100,000. A boiler explosion injures four employees in one accident; their employer-liability damages (outside WC) total $260,000.

• This is bodily injury by accident, so the each-accident limit of $100,000 applies to the entire accident.
• The insurer pays $100,000; the employer is exposed for the remaining $160,000.

Note how a single per-accident limit governs all four workers together — it is not multiplied per person.

Worked Part Two disease example

Now apply the two disease limits. Same policy, $100,000 / $500,000 / $100,000. Over the policy year, factory fumes cause occupational lung disease in eight employees; employer-liability damages run $90,000 each ($720,000 total).

• The each-employee disease limit of $100,000 caps each claim, so each of the eight $90,000 claims is payable in full.
• BUT the disease policy limit (aggregate) of $500,000 caps the total for all disease claims combined.
• The insurer pays a maximum of $500,000; the remaining $220,000 of valid claims is uncovered.

Lesson: the disease aggregate can be exhausted even when no single claim hits the per-employee cap. Accident has one limit; disease has two.

How the two parts interact

Most real claims are pure Part One statutory-benefit claims — the worker is hurt, files for benefits, and never sues. Part Two only activates when someone tries to hold the employer legally liable for an employment-related injury outside the statute.

The most heavily tested Part Two trigger is the third-party-over (action over) suit: a worker injured by a machine sues the machine manufacturer (a third party not protected by exclusive remedy); the manufacturer then sues the employer for indemnity or contribution, alleging the employer's misuse caused the loss. Exclusive remedy blocks the worker from suing the employer directly, but it does NOT block the manufacturer's claim — so Part Two responds.