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

The Two-Part Architecture

The standard contract sold by private insurers is the NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00. Two operative parts must be kept straight:

The Information Page (the declarations) lists the named insured, Item 3.A states where Part One applies, Item 3.C lists other states (3.4), and Item 4 sets the classifications and rates.

Part One — Workers Compensation

Under Part One, the insurer agrees to pay promptly when due the benefits required of the insured by the workers compensation law of any state listed in Item 3.A. There is no dollar limit because the promise is to pay whatever the statute requires, however large.

Key Part One mechanics tested on the exam:

• No deductible for the injured worker; medical is paid in full.
• The insurer's defense and claim handling is included; defense costs do not erode benefits.
• If the insurer and employer disagree, the state workers comp board/commission has jurisdiction, not a civil jury.
• Part One follows the law as it changes; statutory amendments are picked up automatically.

Trap: "What is the Part One limit?" The answer is that benefits are statutory/unlimited, not a dollar figure on the dec page.

Part Two — Employers Liability

Part Two is liability insurance that responds when an employee or a related party sues the employer for a work injury in a way the comp statute does not cover. It fills the gaps between no-fault benefits and tort exposure:

These are losses the workers comp statute does not pay, so a separate liability promise with dollar limits is required.

Part Two Split Limits

Part Two carries three limits, written like 100/500/100 (thousands):

Worked numeric: Limits are 100/500/100. A boiler explosion injures three employees in one accident; the by-accident limit of $100,000 per accident is the cap for all three combined, not per person.

Separately, four employees develop an occupational lung disease over time. Each is capped at $100,000 per employee, and the total for all disease claims cannot exceed the $500,000 policy aggregate. So four claims of $150,000 each ($600,000) are limited: each cut to $100,000 = $400,000, still within the $500,000 aggregate, so $400,000 is paid.

Part Two Exclusions

Three exclusions are heavily tested:

• Intentional injury — bodily injury intentionally caused or aggravated by the insured is excluded (it would defeat the insurance bargain).
• Other benefit obligations — anything payable under a workers comp, occupational disease, unemployment, or disability benefits law is excluded from Part Two (it belongs under Part One or another law).
• Punitive/exemplary damages for the illegal employment of a minor or other unlawful employment is excluded.

Also excluded: injury to a worker employed in violation of law with the insured's knowledge, fines/penalties for statutory violations, and obligations under federal acts unless endorsed (see 13.4).

Part One Has No Dollar Limit

A defining feature: Part One (Workers Compensation) has no policy limit — the insurer promises to pay whatever the state statute requires, because benefits are set by law, not by the policy. Part Two (Employers Liability) does carry dollar limits, because it covers common-law suits that fall outside the statutory benefit system.

When Part Two Actually Pays

Part Two responds to liability suits the exclusive-remedy bar does not block, including third-party-over actions (an injured worker sues a third party, who then sues the employer), consequential injury to a family member, dual-capacity claims, and loss of consortium. It does not pay statutory benefits — that is Part One.

Part Two Limits Recap

A common written limit is $100,000 / $500,000 / $100,000. Part Three (Other States Insurance) extends coverage to operations in states listed in the schedule, preventing a gap when an employee is hurt in a state not named under Part One — a frequent exam trap where a worker is injured in an unscheduled state and the claim is denied.