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

The Standard Policy

Most states use the National Council on Compensation Insurance (NCCI) form, the Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00 C). It has six parts; the exam concentrates on Part One and Part Two.

Part One — Workers Compensation pays the benefits required by the workers compensation law listed in the Information Page. Because the state sets the amounts, Part One has no policy dollar limit — the insurer pays whatever the statute requires.

Part Two — Employers Liability

Part Two — Employers Liability covers an employer's tort liability for work-related bodily injury that is not governed by the comp statute. It fills gaps such as:

• Third-party-over actions — an injured worker sues a third party (e.g., a machine maker) who then sues the employer for contribution.
• Consequential bodily injury — a family member's claim (loss of consortium, care, services).
• Dual-capacity suits where the employer is sued in another role (e.g., as product manufacturer).

Unlike Part One, Part Two does carry dollar limits.

The Three Employers Liability Limits

Part Two states three limits, commonly written as $100,000 / $500,000 / $100,000:

Worked example: Three employees are hurt in one explosion (an accident) and the employer is found liable in a third-party-over suit for $260,000 total. With a $100,000 each-accident limit, Part Two pays $100,000 toward that single accident; the rest is the employer's exposure or umbrella's.

Disease Limits Work Differently

The disease limits are split deliberately. The by disease — each employee limit caps any single worker's disease claim, while the by disease — policy limit is an aggregate cap for all disease claims combined during the term.

Worked example: Five long-term employees develop an occupational lung disease, each with a $90,000 judgment. With limits of $100,000/$500,000/$100,000, each claim is under the $100,000 per-employee cap, but the five claims total $450,000 — under the $500,000 aggregate, so all are paid. A sixth identical claim would push the total to $540,000 and be capped at the $500,000 aggregate.

The Other Policy Parts

• Part Three — Other States Insurance extends coverage to states listed in Item 3.C (covered in 13.4).
• Part Four — Your Duties If Injury Occurs lists post-loss duties (prompt notice, cooperation).
• Part Five — Premium explains audit and rating.
• Part Six — Conditions addresses cancellation, inspection, and transfer of rights.

Exam trap: candidates assume employers liability is unlimited like Part One. It is not — only Part One is open-ended; Part Two is capped by the three stated limits.

Why Part One Is Open-Ended but Part Two Is Capped

The dual structure exists because Part One funds a statutory obligation (no dollar limit — the state law sets the benefits), while Part Two funds a tort liability that, like any liability coverage, needs stated limits. Distinguishing the two on a fact pattern is a guaranteed exam item.

The Gaps Part Two Fills

Part Two responds where comp does not apply:

• Third-party-over actions — a worker sues a product maker, who impleads the employer.
• Loss of consortium / consequential claims by a spouse or family member.
• Dual-capacity suits (employer sued as landlord or manufacturer).
• Injury to a worker not covered by the comp statute who sues in tort.

Worked layering example: an explosion injures four employees; a third-party-over suit assesses the employer $650,000. With Part Two limits of $100,000/$500,000/$100,000, the BI-by-accident each-accident limit of $100,000 applies (all four arose from one accident), so Part Two pays $100,000; the remaining $550,000 must come from the employer's umbrella/excess policy or out of pocket.

Exam traps: the standard limits $100,000/$500,000/$100,000 mean each-accident BI / disease aggregate / disease each-employee — note that the middle number is the disease aggregate, not a per-accident figure; and Part Two excludes punitive damages, contractual liability, and employment-practices claims (those need EPLI). Candidates routinely err by assuming employers liability is unlimited like Part One.

The Six Parts and the Information Page

The standard NCCI policy (WC 00 00 00) is organized around the Information Page (its declarations) plus six parts. Reading the Information Page items is a tested skill:

Disease-Limit Drill

The three Part Two limits — each accident / disease policy limit / disease each employee — are tested with multi-claim fact patterns.

Worked example: limits $500,000 / $1,000,000 / $500,000. Over the policy year, three workers develop an occupational disease with judgments of $400,000, $450,000, and $300,000.

• Each is under the $500,000 per-employee disease cap, so each is individually payable.
• Combined = $1,150,000, but the $1,000,000 disease aggregate caps total disease payments, so Part Two pays $1,000,000; the excess $150,000 is the employer's exposure (or umbrella's).

Exam traps: Part One has no dollar limit (statute controls) while Part Two is capped; the middle Part-Two number is the disease aggregate, not a per-accident figure; and Part Two responds to tort theories comp does not cover — third-party-over, loss of consortium, dual capacity — but excludes punitive damages and contractual liability.