Workers Compensation and Employers Liability Insurance

Fast Facts

Workers compensation insurance provides statutory benefits defined by state law and covers employee injury claims beyond workers comp scope.
Six Parts of the Standard Policy:
- Part One: Workers Compensation Insurance - Pays statutory benefits per state law.
- Part Two: Employers Liability - Covers liability claims outside workers comp law.
- Part Three: Other States Insurance - Covers incidental injuries in listed states.
- Part Four: Your Duties If Injury Occurs - Outlines employer’s duties post-injury.
- Part Five: Premium - Explains premium calculation.
- Part Six: Conditions - Describes policy conditions.

Workers compensation coverage is defined by state law, making the policy description brief. Employers liability fills gaps for claims not covered by workers comp.

Policy Details

The standard workers compensation and employers liability policy, developed by the National Council on Compensation Insurance (NCCI), is used in 46 states and D.C. Four states (ND, OH, WA, WY) require monopolistic state funds.

Information Page

Lists named insured, workplaces, employers liability limits, other states coverage, and policy effective date.

General Section

Who Is Insured: The employer listed in the Information Page. For partnerships, only partnership employees are covered. Corporations cover employees but not officers as insureds for liability.
Covered Workplaces: All workplaces listed in the Information Page.
Applicable Law: State workers compensation laws listed in the Information Page; federal laws require endorsements.

Corporate officers are eligible for workers comp benefits but can opt out in many states. Partners/sole proprietors may opt in for coverage.

Part One: Workers Compensation Insurance

Pays statutory benefits for job-related bodily injury or death due to accident or occupational disease, as required by state law.

No benefit limits; payments match state-prescribed benefits.
Insurer defends claims/suits at its own expense and can settle without employer consent.
Covers reasonable expenses, bond premiums, and judgment interest.
Exclusions: Punitive/exemplary damages, payments due to willful misconduct, illegal employment, safety law violations, or employee discrimination.

Insurer has subrogation rights to recover benefits paid from liable third parties (e.g., unsafe machinery manufacturers).

Part Two: Employers Liability Insurance

Covers employer liability for employee injuries not covered by workers comp, such as lawsuits.

Coverage Criteria

Injury must arise out of and in the course of employment.
Employment must be necessary/incidental to work in listed states.
Accidents must occur during the policy period; diseases must be caused/aggravated by employment conditions.
Suits must be brought in the U.S., its territories, or Canada.

Exclusions

Punitive damages for illegal employment.
Intentional injuries caused by the employer.
Injuries outside U.S./Canada (except for residents temporarily abroad).
Employment-related practices (e.g., harassment, discrimination).
Injuries under federal acts (e.g., Longshore, Jones Act).
Contractual liability (e.g., hold harmless agreements).

Limits of Liability

Bodily injury by accident: $100,000 per accident.
Bodily injury by disease: $100,000 per employee.
Bodily injury by disease: $500,000 per policy period.

Employers liability covers lawsuits like third-party-over actions, loss of consortium, or claims by exempt employees (e.g., farm laborers).

Part Three: Other States Insurance

Covers incidental injuries in listed states where the employer does not have facilities. States must be listed in the Information Page.

Excludes monopolistic states (ND, OH, WA, WY, PR, VI).
Insured must notify insurer within 30 days if operations begin in a listed state.

Part Four: Your Duties If Injury Occurs

Notify insurer immediately.
Provide names/addresses of injured parties and witnesses.
Submit legal papers and cooperate with insurer.
Avoid actions that interfere with subrogation rights.
Provide immediate medical attention per state law.

Part Five: Premium

Premiums are based on payroll (remuneration) and work classification rates.

Includes payments to independent contractors unless they have their own workers comp insurance.
Final premium calculated post-policy period based on actual payroll.
Insurer can audit payroll records up to 3 years after policy ends.

Part Six: Conditions

Insurer can inspect workplaces to assess insurability/premium.
Policy cannot be transferred without insurer consent.
Insurer must provide 10 days’ written cancellation notice (or per state law).
Insured can cancel with advance written notice.

Selected Endorsements

Voluntary Compensation: Offers benefits to exempt employees.
Sole Proprietors/Officers Coverage: Covers elected individuals.
Anniversary Rating Date: Adjusts premium/rates on anniversary.
Waiver of Subrogation: Waives insurer’s recovery rights against named parties.
Longshore and Harbor Workers: Covers LHWCA exposures.
Outer Continental Shelf Lands Act: Covers OCSLA exposures.
Maritime Coverage: Covers maritime exposures.
Federal Employers Liability Act: Covers FELA exposures.

Key Takeaways

Workers comp provides statutory benefits; employers liability covers lawsuits outside workers comp.
Coverage applies to listed states; other states coverage requires listing.
Premiums are based on payroll and audited post-policy.
Employers must notify insurers immediately of injuries and cooperate.
Endorsements tailor coverage for specific needs (e.g., federal laws, exempt employees).