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

The WC & EL Policy Has Two Insuring Agreements

The standard policy is the NCCI Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00 C). It contains two distinct coverages bound into one contract:

• Part One — Workers Compensation Insurance (Coverage A)
• Part Two — Employers Liability Insurance (Coverage B)

The Information Page is the policy's declarations. Its Item 3.A lists the states where statutory coverage applies; Item 3.B shows Employers Liability limits; Item 3.C is Other States Insurance; Item 4 describes classifications and premium basis.

Part One: Pay 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. Its defining feature: there is no dollar limit. Whatever the statute commands — including a multimillion-dollar catastrophic claim — the insurer pays.

Key Part One mechanics:

• The insurer pays promptly as benefits become due; it does not wait for a lawsuit.
• If the employer must pay a penalty for statutory violations (e.g., serious-and-willful misconduct surcharges), the insurer can recover that extra amount from the employer — the policy does not fund the employer's wrongdoing.
• Part One has no aggregate limit because the statute, not the policy, defines the obligation.

Part Two: Employers Liability Fills the Tort Gaps

The exclusive-remedy bargain blocks most employee suits — but not all injury-related liability. Part Two (Coverage B) pays sums the employer becomes legally obligated to pay as damages for a covered work-related bodily injury when the comp statute does not bar the action. Unlike Part One, it is true liability insurance with limits.

Part Two responds to gaps such as:

• Third-party-over actions — an injured worker sues a product manufacturer, who then sues the employer for contribution/indemnity.
• Consequential bodily injury — injury to a spouse, child, or relative of the injured worker (e.g., loss of consortium).
• Dual-capacity suits and care/loss-of-services claims.
• Loss of consortium brought by a family member.

Part Two Limits: Reading the Three-Number Format

Employers Liability limits appear as three figures, e.g. $100,000 / $500,000 / $100,000:

Note the trap: the middle number is the disease AGGREGATE, and the third is disease per employee — many candidates reverse them. The standard minimum limits are commonly $100,000/$500,000/$100,000.

Worked example: A disease claim by one employee is capped at the per-employee figure ($100,000). If three employees develop the same occupational disease at $100,000 each = $300,000, the $500,000 disease aggregate still has room. But a fourth, fifth, and sixth claim would eventually exhaust the $500,000 aggregate, after which Part Two pays nothing more for disease.

Monopolistic States

In monopolistic state fund states — North Dakota, Ohio, Washington, and Wyoming (mnemonic "ND, OH, WA, WY") — employers must buy Part One coverage from the state fund, not a private insurer. Because the state fund typically does not sell Part Two, employers obtain Employers Liability via a "stop gap" endorsement on their CGL policy. Remember: monopolistic states block private Part One sales, so the EL gap is filled by the CGL stop-gap endorsement.

Part One — Statutory, Unlimited, No Policy Limit

Part One (Workers Compensation Insurance) is the insurer's promise to pay promptly all benefits the workers compensation statute of a listed state requires — there is no dollar limit on Part One because the obligation is whatever the law says. The insurer also gains the right to handle and settle claims and the employer must reimburse the insurer for any payments the insurer makes that exceed what the law required at the employer's direction. Because Part One simply incorporates the statute, the same policy adjusts automatically when benefit levels change.

Part Two — Employers Liability Fills the Tort Gaps

Part Two (Employers Liability Insurance) is true liability coverage for employee injury situations the workers comp statute does not cover, where the employer can still be sued. It responds to: third-party-over actions (a product maker sued by the employee then sues the employer for contribution), consequential bodily injury to a family member, dual-capacity suits, loss of consortium, and injuries to employees not subject to the WC act. Part Two is what makes the policy a complete employer protection rather than just a statutory pass-through.

Reading the Part Two Three-Number Limits

Part Two limits appear as three numbers, e.g., $1,000,000 / $1,000,000 / $1,000,000:

• Bodily Injury by Accident — each accident (first number).
• Bodily Injury by Disease — policy limit (aggregate cap for disease, the middle number).
• Bodily Injury by Disease — each employee (third number).

A stem giving the three numbers and a disease claim affecting several employees tests whether you apply the per-employee and disease aggregate correctly — the disease aggregate caps total disease payouts for the term.

Monopolistic State Funds

In monopolistic states (historically North Dakota, Ohio, Washington, Wyoming, plus territories), employers must buy WC from the state fund, and private Part One is unavailable. Employers there obtain Employers Liability (stop-gap) coverage by endorsement on the CGL, because the state fund provides statutory benefits but not the Part-Two tort protection — a frequently tested wrinkle.