WC 00 00 00 C–WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY ANALYSIS

(December 2020)

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INTRODUCTION

This policy provides two types of coverage. The first coverage is Workers Compensation Insurance. This coverage provided is not explained within the policy, but instead reference is made to the state Workers Compensation Law that is applicable in the state in which the injury took place. The second coverage is Employers Liability Insurance. This coverage does include coverage description along with limits that apply. It applies only when coverage is not available under Workers Compensation Insurance and only when the state in which the injury occurs allows it to apply.

WC 00 00 00 C–WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY ANALYSIS

Note: This analysis is of WC 00 00 00 C. This edition is effective 01/01/15. The changes from the prior edition are in bold print.

The policy opens by explaining that the insurance company agrees to provide the coverages indicated in return for the named insured paying the premium. This is subject to all of the policy’s terms and conditions.

GENERAL SECTION

A. The Policy

The policy includes the Information Page and all endorsements and schedules that are listed on it as of its inception date. It is an insurance contract between the named insured employer and the insurance company identified on the Information Page. The only agreements that affect the insurance coverage provided are the ones stated in the policy. Policy terms and conditions cannot be changed or waived unless the insurance company does so by issuing written endorsements.

Note: Waiver means intentionally or voluntarily relinquishing a known right. As a result, this provision states that a written endorsement is needed to confirm that either party is surrendering a known right. The intent of this language is to prevent any oral agreements or unauthorized written agreements from being considered or treated as part of the insurance policy.

Example: Linda copies a brochure in the human resources office about Employers Liability coverage that describes the coverage the policy provides. She notices several statements to the effect that the brochure only describes the coverage. Linda wants to know exactly what coverage is provided and asks her human resources manager for a copy of the company’s actual policy to review.

B. Who Is Insured

The employer identified in Item 1. on the Information Page is the named insured. If the form of business is a partnership, and the named insured is the partnership, an individual partner is considered an insured but only to the extent of being the employer of the partnership's employees.

Note: Unlike many liability coverage forms and policies, the spouse of an individual, partner, member, or manager of a joint venture is not automatically included and covered as an insured. If the spouse is an employer, the spouse must be either named or have a separate policy that covers the operations for which the spouse is the employer.

Example: A partner in a law firm is an insured with respect to the employees of the law firm. However, he is not an insured for injuries to his household employees.

Note: WC 00 03 05–Joint Venture as Insured Endorsement makes each member of the joint venture an insured under a policy where the joint venture is a named insured. Similar to the partner as an insured, the member is an insured only with respect to the joint venture's employees.

C. Workers Compensation Law

The term "workers compensation law" means the workers compensation law(s) and the occupational disease law(s) of each state and/or territory listed under Item 3. A. on the Information Page. When those laws change during the policy period, those changes are incorporated into this policy. This is for state and territory law only so does not include any federal workers compensation or occupational disease law(s). It also does not apply to any non-occupational disability benefits law(s).

Note: Because this paragraph specifically excludes federal workers compensation, occupational disease, or similar laws, special endorsements are available when such coverage is required.

D. State

When the term "state" is used anywhere in the policy, it means any state of the United States of America plus the District of Columbia.

Note: Item C. above states that territories can be listed under Item 3 and be covered. However, this section does not broaden the definition of state to include territories.

E. Locations

Coverage applies to workplaces that are listed under Item 1 or Item 4 on the Information Page. It also covers all other workplaces in states listed under Item 3 unless other insurance or self-insurance covers those workplaces.

Notes:

This policy covers the named insured's total liability as any state workers compensation law establishes it. Some states have laws that require insuring this total liability under one policy. In states that do not have this requirement, it is possible to "carve out" certain workplaces and exclude them from coverage. An example of this is when a project uses a wrap-up program, and all contractors that work within that wrap-up are covered under the wrap-up workers compensation program. WC 00 03 02–Designated Workplaces Exclusion Endorsement is used to carve out the coverage for the wrap-up project from the subcontractor’s policy.

Example: Big Boy Builders subcontracts with Joe’s Flooring Installations to install laminate floors in living/dining rooms in new homes it builds in an exclusive subdivision. All workers on this Big Boy construction project are covered under a wrap-up workers compensation program. Joe does not include any individual workers compensation premium in his costs because the wrap-up covers all workers compensation injuries. Joe can remove the project payroll from his policy by attaching WC 00 03 02–Designated Workplaces Exclusion Endorsement.

Multiple policies issued to insure various employers engaged in large construction projects can be combined for premium discount purposes where the law permits. The same insurance company or group must issue them, and they must be limited to the applicable employer's work at the construction site. Similar coordinated policies are also permitted to address other related cases and circumstances.

Workers Compensation and Employers Liability Insurance Policy Available Endorsements and Their Uses

Premium Discount Endorsement

Overview of Wrap-up Programs

PART ONE–WORKERS COMPENSATION INSURANCE

A. How This Insurance Applies

This insurance covers bodily injury by accident or bodily injury by disease, including death that results from either. This is subject to the following:

1. An Accident

When bodily injury is due to an accident, bodily injury must occur during the policy period.

Example: Jordan Electrical’s policy period with Injury Prone Mutual is from 04/01/20 to 01/13/2021 and with Better Care Mutual from 04/01/2020 to 04/01/2021. An employee, Kelly, is working on site and is shocked on 03/31/20 but continues to work. She suffers a heart attack 04/02/2021 and is rushed to the hospital. The attending doctors explained that the heart attack was a delayed reaction to the electrical shock she sustained two days earlier. Prone Mutual believes the bodily injury occurred on 04/02/20 with the heart attack, but Better Care Mutual believes the bodily injury occurred at the time of the electrical shock.

2. Disease

When bodily injury is due to disease determining the exact policy that must respond becomes more difficult. Because many disease-related bodily injuries are due to cumulative exposure, many different policies could be expected to respond. Because of the need to establish a single policy to respond, the policy explains that the policy in effect when the employee was last exposed to the conditions that either caused or aggravated the bodily injury by disease must respond.

Related Court Cases:

Claimant’s Last Employer Was Responsible For His Injuries

Shipyard Carpenter’s Last Employer Liability for His Asbestos Exposure and Death Benefit

Example: Penelope worked as an administrative assistant for 15 years. She worked for five different employers. On 05/25/20, while employed by Major Insurance Agency, her doctor diagnosed the pain in her arms and shoulders as resulting from carpel tunnel syndrome. He explained that it was the result of her many years of typing. Only the Major Insurance Agency’s workers compensation policy in effect at the time of the diagnosis responds to the claim.

B. We Will Pay

The insurance company agrees to pay benefits promptly, but only those benefits that are due from the named insured based on the applicable workers compensation law.

Notes: This is the basic insuring agreement and indemnity provision and is probably the most important section in the policy. It agrees that the policy insures the employer's entire liability under the designated law or laws. Specific benefits are not listed because coverage depends on each individual state’s law.

This is unlimited coverage because of the way state workers compensation laws are structured and arranged. This policy does not limit medical benefits to injured employees, but the state law may do so. Disability benefits are limited, based on the applicable state’s benefits schedule.

Example: Patty and Maxine are sisters who work at the same company but at different plants in adjoining states. Both are injured on the job, and both are covered. Patty is furious when Maxine receives almost double her disability benefits and with the ease in which Maxine is able to receive her medical benefits and demands that her company do better. Her employer’s agent explains that the difference is in the state laws, not in how the insurance company is handling the claims.

C. We Will Defend

The insurance company has both the right and the duty to defend any claim, suit, or other legal action against the named insured with respect to benefits that this insurance coverage pays. However, it is not obligated to defend any legal action that this insurance does not cover.

The insurance company also has the right to investigate and settle any claim or legal action.

Example: Jerad is a truck driver. He submits a claim for total disability because of an inoperable herniated disc that his doctor diagnosed. Jerad states that his pain is so bad he must stay in the house all the time. Just Checking Insurance Company hires an investigator to secretly follow Jerad for a week to verify his claims. The pictures of Jerad playing basketball and fixing his roof are used to justify Just Checking denying his claim.

Note: The insurance company covers this defense provision at its own expense and is similar to provisions in most other liability coverage forms and policies. The insurance company retains and compensates legal counsel as necessary to properly represent the employer in lawsuits, administrative and judicial proceedings, and appeals. The insurance company will select legal counsel that it deems appropriate as part of its right to defend, investigate, and settle claims. The company's duty to defend is considered broader than its duty to indemnify, which means that unless the claim's allegations clearly remove it from the scope of coverage, the insurance company must continue to defend the insured until it is clearly established that the loss is not covered.

D. We Will Also Pay

The insurance company also pays many costs and expenses as part of a claim, suit, or legal action it defends in addition to other amounts it pays. They include the following:

1. Those reasonable expenses that the named insured incurs but only if they are incurred at the insurance company’s request. Loss of earnings that the named insured incurs are not compensated.

2. Premiums for bonds to release attachments or for appeal bonds. The premium paid is limited to only the premium need to pay for a bond that is within the limit of insurance available to pay for a claim under this insurance.

3. Costs that a court assesses against the named insured as a part of a covered litigation

4. Interest that is required by law on judgments but only the interest that accumulates until the insurance company offers to pay the amount due.

5. All expenses that the insurance company incurs if they are related to a claim, suit, or action

Example: This costs that Just Checking Insurance Company incurred to investigate Jerad in the example above.

E. Other Insurance

More than one insurance company may be responsible for a particular loss. In that case, this insurance company pays only its share of costs and benefits covered by all available sources. The other sources may be other insurance companies or self-insurance. The way the share is determined is based on equal shares. This means that each pays equally until its limits are exhausted. As each other source exhausts its limit, the remaining sources pay equal until the full amount is paid.

Example: John was seriously injured in an accident. Coverage is available from two insurance companies and a self-insurance plan. Company C insurance company is subject to a $100,000 limit, but the other carriers are not limited. The amount of John’s claims totals $1,250,000 over his lifetime and is paid as follows:
Company	Initial Amount	Remaining Amount	Total Paid
A	$100,000	$475,000	$575,000
B	$100,000	$475,000	$575,000
C	$100,000	0	$100,000
Total	$300,000	$950,000	$1,250,000

Note: Employers in all states must either purchase insurance to cover their full liability or qualify as self-insurers by meeting certain specific financial requirements. A few large and financially stable employers may be completely self-insured, but most also purchase excess coverage, either voluntarily or as part of having to qualify for self-insurance. Excess coverage is similar to other kinds of excess liability insurance. It pays the amount that exceeds a certain monetary threshold, such as a deductible or retention amount. This excess may apply as specific excess on a specific loss or as aggregate excess for the total of losses that occur during the policy period.

F. Payments You Must Make

The insurance company is not willing to pay on behalf of the named insured any amounts that are beyond the benefits described in the applicable workers compensation law. Examples of such costs that the insurance company does not pay are those that:

1. Are the result of the named insured engaging in misconduct that is both serious and intentional

2. Are imposed because the named insured employed an individual whom it was not legally permitted to employ. This applies only when such employment was done so with the named insured’s knowledge.

3. It must pay due to noncompliance with health or safety regulations

4. Result from a violation of a workers compensation law relating to discharging, coercing, or in any way discriminating against any employee

In some cases, the insurance company may pay these payments in order to settle a claim. However, in such cases, the named insured must reimburse the insurance company.

Example: Happy Valley Printers employed several underage teenagers to work in its ancient plant. One of the teens sustained a serious injury to his arm when an overheated machine broke down on one particularly hectic day. Happy Valley promptly reported the loss, submitted the claim, and was honest about the worker’s age and the details of the accident. A provision in the state's workers compensation law provided for payments that exceed regular benefits for underage workers, and Happy Valley’s carrier had to make the additional payments. Happy Valley then had to reimburse the carrier for those additional payments because it violated state hiring laws.

G. Recovery from Others

The insurance company has the named insured's rights of recovery against those responsible for an injury. It also has the rights of any party entitled to benefits under this insurance to recover payments it paid from those liable from the injury that resulted in those payments. The named insured must do everything possible and necessary to protect those rights and help the insurance company enforce them.

Notes:

This is similar to the rights of recovery provisions in other coverage forms and policies. Most workers compensation laws state that the employer is entitled to the employee's rights of recovery against third parties to the extent of the compensation it owes. Under this provision, the employee's rights of recovery against others pass to the employer by the workers compensation act and, in turn, pass to the insurance company.

Example: Zachary works for Rapunzel, LLC. While he is driving to an appointment, the car Kimberly drives strikes his car and seriously injures his left hand. Rapunzel’s worker’s compensation carrier, Great Job Mutual, pays for Zachary’s injuries according to its policy terms. Great Job Mutual then assumes all of Rapunzel and Zachary’s rights of recovery against Kimberly to recover the payments it made and may continue to make.

The insurance company obtains the employee's rights of recovery against third parties to the extent of the benefits it paid. However, there may be situation where the named insured has waived its rights of recovery. If so, WC 00 03 13–Waiver of Our Right to Recover from Others Endorsement can be attached that waives the insurance company's right of subrogation against designated third parties responsible for an injury. The endorsement schedule is used to list the persons or organizations that the insurance company agrees to not subrogate against.

H. Statutory Provisions

This section contains six statements that are not universal. They apply only in those states where they are required by law.

1. The time at which the named insured receives notice of an injury from an employee establishes the time of notice for the insurance company.

Note: This is very important because it means that the employee is not harmed by an employer making a late report of injury to the insurance company.

2. The insurance company continues its obligations under this even if the named insured goes bankrupt or becomes insolvent following an injury.

3. The insurance company is the party responsible for paying benefits to any person entitled to them. That person has the right to enforce that responsibility. The enforcement can be against the named insured, the insurance company, or both.

4. The insurance company and the named insured are bound together in any decisions that are made against the named insured regarding the workers compensation law. However, this is subject to any policy provision that is not in conflict with the law.

5. The coverage provided by this policy matches any part of any workers compensation law that applies to both of the following:

Benefits that are to be paid by this insurance
Other items that the insurance company is required to pay, such as special taxes, payments made to security funds, or to other special funds, and assessments.

6. If any terms of this policy or insurance conflict with a particular state’s workers compensation law, this statement is used to modify those terms to conform to that conflicting law.

Note: This is a further reiteration that the state workers compensation law always prevails.

The six statutory provisions do not relieve the named insured of any duty that it owes under this policy.

PART TWO–EMPLOYERS LIABILITY INSURANCE

Part Two provides Employers Liability Insurance as opposed to Part One that provides Workers Compensation Insurance. The main difference between the two is that Part One applies to statutory benefits the named insured must pay. Part Two applies to common or tort law or other damages for which the named insured is liable.

Monopolist state funds do not provide Part Two Coverage. Part Two Coverage must be purchased through a private insurance carrier. There are two different approaches. One is to endorse a Workers Compensation Policy while the other approach is to endorse a Commercial General Liability Policy.

Monopolistic State Funds

Stop Gap-Employers Liability Coverage

A. How This Insurance Applies

Employers liability insurance is coverage for bodily injury by accident or bodily injury by disease. If death results from such bodily injury, death is also considered bodily injury.

1. Only bodily injury that arises from the named insured’s employment and during the course of that employment by is covered.

Note: Proving whether or not an employee is in the course of employment is often one of the major issues for both workers compensation and employers liability.

Claimant’s Injury Arose Out Of Employment, Not Social Or Recreational Event

Claimant’s Injuries in Vehicle Accident While Returning to Work From Home Compensable

Employee’s Injuries From Fall After Returning From Smoke Break Arose Out Of And In The Course Of Her Employment

2. The work the employee performs at the time he or she incurs bodily injury is not required to take place in a state or territory listed in Item 3. A. on the Information Page. However, that employee's employment must be considered necessary or incidental to the named insured’s work at a location within such a listed state or territory.

3. The bodily injury that is the result of an accident must actually occur during the policy term.

4. The bodily injury that is the result of a disease must be the result of conditions that are within the named insured's employment. The condition can either cause or aggravate the disease. The named insured where an employee is working when his or her last day of exposure to the conditions takes place is the named insured that must respond. The policy in force at the time that employee is working during the last exposure is that only one that will respond.

5. Suits or legal action against the named insured for bodily injury by accident or disease must be brought in the United States of America, its territories or possessions, or Canada.

Note: There is no mention of what the employer is to do if suit is brought by a person who was injured in the United States but moved to another country and files suit.

B. We Will Pay

The insurance company pays all amounts the named insured must legally pay as damages because of bodily injury to its employees that this insurance covers. Not all damages are covered, though. First, the particular state law must permit recovery. Second, the damages must be from one of the following:

1. An employee of the named insured is injured, and that employee makes a claim against a third party. That third party then pursues actions against the named insured to recover for that employee’s claim.

Note: This is commonly referred to as a "third party over" claim made against the employer by a third party an injured employee sues.

Example: Mike was an employee of MasonryIsUs and was injured on a construction site. While carrying some hollow concrete block, he tripped over some pipes that fell from a pile of pipes that employees of Bartleby Plumbing improperly stacked. He was entitled to both workers compensation benefits from MasonryIsUs and damages from Bartleby. If he sued Bartleby and it, in turn, sued (or "impleaded") the insured employer for contribution or indemnification, MasonryIsUs' Employers Liability coverage would apply.

2. Care and loss of services

Note: If the employee makes a claim under items 1 or 4 of this item, a separate claim may be made by a family member for his or her care and loss of services. This item would pay for that claim.

3. Consequential bodily injury to the injured employee’s brother, sister, parent, child, or spouse. This is subject to a requirement that the damages are the direct consequence of a bodily injury incident that arises from and occurs during the course of that employee’s employment by the named insured.

If an employee makes a claim under items 1. or 4. of this section, a family member can make a separate claim for consequential injuries that relate to the employee’s injuries.

4. Because of bodily injury to the named insured's employee that arises from and in the course of employment and is claimed against the named insured in a different capacity than as an employer

Note: Employers liability also covers damages an employer owes under the so-called "dual capacity" doctrine. It states that an employer may have two different legal personalities for purposes of liability to an employee.

Example: Joe worked for Sturdy Steel Doors, a steel door manufacturer. He was welding a door when one of its spring-loaded hinges snapped open, struck, and seriously injured his arm. When the hinge was inspected, it was determined that the spring-loaded component of the hinge did not have the proper retaining pin to hold it in place. Sturdy Steel Doors may be liable for Joe’s injury under products liability because it manufactured the defective hinge.

Notes:

This is the indemnity provision of Part Two. The company pays all amounts the insured employer is legally responsible for as damages because of bodily injury that this policy covers. "Damages" is the key word. Employers liability insurance is coverage against torts or other liability for damages. This contrasts with the employer's statutory liability for workers compensation benefits under Part One.

Part Two does not apply to true no-fault federal workers compensation laws, like the United States Longshore and Harbor Workers Compensation Act (USL&HWCA). Part One can provide such true no-fault coverage for USL&HWCA, Federal Black Lung, and other federal laws by endorsing the policy to amend its language to include a federal law or laws.

Defense Base Act

Federal Coal Mine Health And Safety Act
Federal Employers' Liability Act (FELA) of 1908

Outer Continental Shelf Lands Act

United States Longshore and Harbor Workers' Compensation Act

C. Exclusions

Coverage does not apply to the following:

1. Any liability that has been assumed under a contract. The only exception is for any warranty that the named insured will perform its work in a workmanlike way.

2. Damages that are awarded as either punitive or exemplary damages when the reason for the award was that the person injured had been employed in violation of the law.

3. When an employee, with full knowledge of the named insured or any of its executive officers, is hired in violation of the law and is then injured, there is no coverage for the bodily injury to that employee.

4. Obligations that workers compensation, occupational disease, unemployment compensation, disability benefits, or any similar laws impose

Note: This exclusion removes all obligations under workers compensation or similar laws from Part Two because either Part One covers them or they are not covered at all. However, a specific employee not covered under a workers compensation law may sue the employer for damages. Part Two may cover that claim. For example, workers compensation laws do not usually apply to agricultural and domestic workers.

5. Any bodily injury the named insured intentionally causes or aggravates

Note: This important exclusion is similar to corresponding exclusions in other liability coverage forms and policies. It also raises at least two points that vary in importance from state to state, depending on the state’s law. First, most states except intentional injury by the employer from the exclusive remedy doctrine. Since the exception applies to Part One, this exclusion is needed in Part Two to exclude coverage for these types of injuries. Second, the exclusion applies to the employer but not to co-workers. In most states, the employer is not responsible for an employee’s intentional torts.

6. Bodily injury that occurs outside the United States of America, its territories or possessions, and Canada. However, coverage does apply to bodily injury that citizens or residents of the United States of America or Canada sustain while temporarily outside either of these countries.

7. Any damages due to the named insured coercing, criticizing, demoting, evaluating, reassigning, disciplining, defaming, harassing, humiliating, terminating, or discriminating against any employee. This also applies to damages that result from any of the named insured's personnel practices, policies, acts, or omissions.

Example: Sara is Pete’s administrative assistant. Pete has a bad temper. Whenever he becomes angry at anyone, he yells at Sara, humiliates her in front of her co-workers and outsiders, and defames her abilities and character. She begins to suffer high blood pressure, anxiety attacks, and other stress related issues but cannot quit her job due to economic realities. She has a serious stroke, and her family sues Pete. The workers compensation policy does not provide coverage in this case because of Pete’s actions towards Sara.

8. Bodily injury to persons working subject to the following Acts:

The United States Longshore and Harbor Workers Compensation Act
The Defense Base Act
The Outer Continental Shelf Lands Act
The Nonappropriated Fund Instrumentalities Act
The Federal Coal Mine Health and Safety Act

The prior edition of this form refers to specific sections within these acts. The term et seq, which means “and what follows,” has been added to the starting section listed with each act to prevent the need for frequent updates. (01 15 change) This exclusion also applies to any other federal workers or workmen's compensation law, any other federal occupational disease law, and any amendments to any of these laws.

The United States Longshore and Harbor Workers Compensation Act (USL&HWCA)

The Defense Base Act

The Outer Continental Shelf Lands Act

The Nonappropriated Fund Instrumentalities Act

The Federal Coal Mine Health and Safety Act

9. When the bodily injury is to a person who is working subject to the Federal Employers' Liability Act. This exclusion also applies to any other federal law that obligates employers to pay damages to employees for bodily injury due to or in the course of their employment. This also includes any amendments to those laws.

Note: The prior edition of this form refers to specific sections within the FELA. The term et seq, which means “and what follows,” has been added to the starting section listed to prevent the need for frequent updates. (01 15 change)

10. When the bodily injury is to a crew member or the master of the vessel. Furthermore, punitive damages that are related to the named insured’s obligation to such injured person for transportation, wages, cure and or maintenance are also not covered. (01 15 addition)

Related Article: Merchant Marine Act of 1920 (Jones Act)

11. Fines or penalties that are required due to any type of violation of any federal or state law

12. Damages that should be paid under the Migrant and Seasonal Agricultural Worker Protection Act. This also includes damages under any other federal law that awards damages for violating those laws or regulations and any amendments to those laws.

Note: The prior edition of this form referred to specific sections within this act. The term et seq, which means “and what follows,” has been added to the starting section listed act to prevent the need for frequent updates. (01 15 change)

D. We Will Defend

The insurance company has both the right and the duty to defend any claim, suit, or other legal action for covered damages that others bring against the named insured. The expense of the defense is borne by the insurance company. This right means that the insurance company makes the decision as to what is investigated, what is settled and what legal action is taken. The insurance company has no duty to defend any legal action against the named insured that is excluded under this policy. All duty to defend ends as soon as the insurance company pays the applicable limit of insurance.

E. We Will Also Pay

The insurance company also pays a number of costs and expenses as part of a claim, suit, or legal action it defends in addition to other amounts it pays. They include the following:

1. Those reasonable expenses that the named insured incurs but only if they are incurred at the insurance company’s request. Loss of earnings that the named insured incurs are not compensated.

3. Costs that a court assesses against the named insured as a part of a covered litigation

4. Interest that is required by law on judgments but only the interest that accumulates until insurance company offers to pay the amount due.

5. All expenses that the insurance company incurs if they are related to a claim, suit, or action

F. Other Insurance

More than one insurance company may be responsible for a particular loss. In that case, this insurance company pays only its share of costs and damages covered by all available sources. The other sources may be other insurance companies or self-insurance. The way the share is determined is based on equal shares. This means that each pays equally until its limits are exhausted. As each other source exhausts its limit, the remaining sources pay equal until the full amount is paid.

G. Limits of Liability

The insurance company's obligation to pay for damages does not exceed the limits of liability under Item 3. B. on the Information Page. They apply as follows:

1. The Bodily Injury by Accident–each accident limit on the Information Page is the most paid for all covered damages due to bodily injury to one or more employees as a result of any one accident.

Note: There is no per person accident limit, which means that this one limit is all that is available for all employees that are injured in a single accident.

2. The Bodily Injury by Disease–policy limit on the Information Page is the most paid for all covered damages due to bodily injury by disease. This applies regardless of the number of employees who sustain bodily injury by disease.

Note: It is important to remember the “last exposure” rule. If several employees are “last exposed” to disease creating conditions during a policy term, it could be quickly exhausted.

The Bodily Injury by Disease–each employee limit on the Information Page is the most paid for all covered damages due to bodily injury by disease to any one employee.

Because some bodily injury by accident can result in disease, this section explains that there is no double dipping. If the disease is the direct result of an accident, the accident limit applies. If the disease is not a direct result of an accident, the disease limit applies.

3. The insurance company does not pay any claims for damages after the limit of insurance that applies is used up paying claims.

Note: Rule 3, Item 14 of the Basic Manual for Workers Compensation and Employers Liability Insurance provides the following standard limits of liability for these coverages:

· $100,000 Bodily Injury by Accident–each accident

· $500,000 Bodily Injury by Disease–policy limit

· $100,000 Bodily Injury by Disease–each employee

These standard limits can be increased to higher limits for the additional percentage premium charges in the rules section.

Example: Barney throws an appreciation party for his 25 employees and their families. He and his wife prepare the food and bring it to the office. Right after lunch, fifteen employees become violently ill, and one dies. The subsequent investigation reveals that Barney mistakenly added caustic cleanser to the gravy instead of flour. When the employees sue him for their injuries, his employers liability is limited to $100,000 Bodily Injury by Accident limit for all injuries sustained. If it had been a disease instead of an accident, the $500,000 policy limit would have applied, subject to $100,000 for each employee.

Note: Additional or excess employers liability insurance can be provided under excess or umbrella policies written separately from the Workers Compensation and Employers Liability Insurance Policy. A few states require unlimited employers liability insurance, and special endorsements are available to meet those requirements.

274.1, AAIS Commercial Umbrella Liability Coverage Overview

275.1, ISO Commercial Liability Umbrella Coverage Form Overview

H. Recovery from Others

The insurance company has the named insured's rights to recover its payments made from any party liable for the injury. The named insured must do everything possible and necessary to protect those rights and help the insurance company enforce them.

Notes:

WC 00 03 13–Waiver of Our Right to Recover from Others Endorsement can be used to waive the insurance company's right of subrogation against designated third parties. The endorsement schedule is used to list the persons or organizations against whom the insurance company agrees not to subrogate against.

I. Actions against Us

The insurance company cannot be sued or have other legal action brought against it unless both of the following apply:

1. The named insured has complied with all policy terms and conditions.

2. A trial and final judgment determined the amount the named insured owes, or the insurance company agreed with the amount owed.

No party has the right to name the insurance company as a defendant in a legal action brought against the named insured to determine its liability. In addition, the insurance company's obligations do not change if the named insured or its estate becomes bankrupt or insolvent.

Note: This provision is the opposite of the "direct action" provision described in H. Statutory Provisions under Part One. In other words, it specifically excludes the right of direct action against the company until these requirements are met.

PART THREE–OTHER STATES INSURANCE

A. How This Insurance Applies

1. This coverage applies only if there are one or more states listed under Item 3. C. on the Information Page.

Note: This means that if the named insured initiates work or operations in any states listed under Item 3. C. on the Information Page, coverage applies as though that state was listed under Item 3. A. on the Information Page. It is important, therefore, to list any state in which even minimal contacts might occur that might trigger that state's workers compensation law.

2. If the named insured initiates work or operations in any state listed under Item 3. C. on the Information Page after the policy effective date and there is no other coverage is available for employee injuries that occur in that state, all policy provisions apply as if the state was listed under Item 3. A. on the Information Page.

3. The insurance company reimburses the named insured for benefits that state’s workers compensation laws require in cases where it is not allowed to pay benefits directly to injured persons entitled to them.

4. This coverage is meant to apply for operations that occur or are started within the policy term. If the operations are in effect on the policy inception date, coverage is available in that state for only 30 days in order to give the named insured an opportunity to contact the insurance company.

Note: This provision strengthens the notification requirement so that the company can more accurately determine the extent of the coverage it provides. Coverage does not apply to that state if the named insured does not notify the company on a timely basis.

B. Notice

The named insured must immediately notify the insurance company of any work or operations it begins in any state listed under Item 3.C. on the Information Page.

Notes:

When this occurs, the company endorses the policy to change that state to a state listed under item 3. A. and uses premium audit or other methods to determine a premium basis for it.

Part Three is a feature unique to the Workers Compensation and Employers Liability Insurance Policy. The insured employer has coverage available for possible workers compensation exposures in states where it does not now have or expect operations or work. It relates specifically to the "extraterritorial" effect of most state workers compensation laws. These laws apply (or are interpreted to apply) to work-related accidents that occur in both the state in question as well as to accidents that occur elsewhere under certain circumstances as follows:

· The contract of hire was made within the state

· The employment was primarily localized within the state

· Even if the injured employee simply resides in the state

Example: An employer has operations in only New York State but sends an employee to Indiana on business. While performing his job in the Hoosier State, the employee sustains serious bodily injury. The employee may be entitled to claim benefits under the Indiana Workers Compensation Law.

On the other hand, an employee working for a California employer injured in an accident in California may be able to assert a claim under the New York Workers Compensation Law if he or she was hired in New York State. As a result, most employers that have employment contracts of any kind in various states may need coverage for possible workers compensation exposures in those states.

PART FOUR–YOUR DUTIES IF INJURY OCCURS

The named insured must immediately report any injury that occurs that this insurance might cover to the insurance company. However, the obligations do not end there.

The following are other required duties:

1. Medical care is to be provided immediately. Other services that are required by the workers compensation law must also be provided.

2. The names and addresses of the injured person or persons are to be given to the insurance company or its agent. The same information for any witnesses to the injury is also to be given to one of them. Other information the insurance company needs is also to be provided.

3. Notices, demands and other legal papers often have time constraints, so it is very important that these be given to the insurance company promptly. However, only those that relate to an injury, claim, suit or other legal proceeding are required.

4. Cooperate with the insurance company as it requests. However, the requests must be related to a claim, suit or legal action and the investigation, settlement, or defense of them.

5. The insurance company may be able to recover from other parties after they have paid out benefits. Because of this, after an injury occurs, the named insured must not interfere with the insurance company’s right and ability to recover.

Note: The named insured, therefore, should not be assuring anyone that “my insurance company will take care of everything,” or sign a statement absolving another party of any wrongdoing related to a particular injury, etc.

6. The named insured has the right to make any payment it wants, but doing so does not create an obligation on the part of the insurance company to reimburse the named insured or pay for any obligation the named insured has taken on without consultation.

Note: The duties above apply to Parts One, Two, and Part Three.

PART FIVE–PREMIUM

This Part describes how and when premium is calculated, when it is paid, and how cancellation affects premium. It also imposes record-keeping requirements on the named insured and gives the carrier the right to inspect and audit the named insured's records that relate to the policy.

A. Our Manuals

The insurance company determines the premium charge based on its manuals of rules, rates, rating plans, codes, and classifications. Any change in these manuals will apply to this policy but only if authorized to do so by either a law or by a government agency that is charged with insurance regulation.

Notes:

As used in this provision, "manuals" has a very specific meaning. Most of the time, the company's manuals of rules, rates, rating plans, codes, and classifications correspond to the manuals NCCI files with the appropriate insurance regulatory authorities on behalf of its member companies in its capacity as a licensed rating or advisory organization. These manuals include the following:

The Basic Manual for Workers Compensation and Employers Liability Insurance

This manual includes the rules, manual rates or loss costs, rating plans and values, codes, classifications, and premium discounts for all NCCI states. The manual rates or loss costs may be only advisory in states where NCCI is an advisory organization and may not actually be adopted by any given insurance company.

The Experience Rating Plan Manual for Workers Compensation and Employers Liability Insurance

This manual describes and details how the mandatory experience rating plan works. With it, the named insured's past loss experience is used to calculate a premium modification factor that either increases or decreases the manual premium to the final net premium charged for the current policy period. It also includes rules that govern how to apply the experience modification, the formula to calculate the experience modification, and the numerical values and factors that formula uses.

The Retrospective Rating Plan Manual for Workers Compensation and Employers Liability Insurance

This manual describes and details how the various optional rating plans that modify the premium for a given policy period work. These plans can be applied in addition to experience rating, based on the named insured's actual loss experience during that policy period.

As stated above, NCCI prepares and files manuals on behalf of its member companies in states where it is the authorized rating or advisory organization. In a few states, independent rating bureaus prepare and file manuals similar to the NCCI manuals, where they are the authorized rating organization. In addition, individual insurance companies may be authorized or required to file their own rates or other manuals in certain states. Here, the reference in the policy means the individual insurance company's manual or manuals. From a strictly legal standpoint, the effect of Part Five A. is to incorporate by reference the various manuals into the insurance policy.

The premium provision resembles Part One in that it effectively incorporates the provisions of the various state workers compensation laws into the policy. Manuals are subject to periodic revisions, and most states revise rates or loss costs annually. The second sentence of this provision provides that manual changes authorized by law or by a regulatory agency apply to the policy. Rule 1. F. in the Basic Manual for Workers Compensation and Employers Liability Insurance explains how to handle classification changes or corrections.

Rule changes usually apply to only policies issued or renewed on or after the effective date of the rule change. On the other hand, changes in manual rates or loss costs may apply to existing policies based on the terms of the rate filing that applies and its approval.

In most cases, rate changes due to changes in the benefit provisions of the state workers compensation law are applied to existing policies on a pro rata basis as of the effective date of the rate change. WC 00 04 04–Pending Rate Change Endorsement and WC 00 04 07–Rate Change Endorsement are the two standard endorsements used with these types of rate changes.

Related Article: Anniversary Rating Date Endorsement

B. Classifications

This provision states that the rate and premium bases for certain business or work classifications are entered under Item 4. on the Information Page. Classifications are based on descriptions the named insured provides for the policy period. Classifications may also be based on the insurance company's (or by others that act on its behalf) inspections of the operations. If the exposures should be classified differently, the insurance company endorses the proper classifications, rates, and premium bases to the policy.

Notes:

It is not always possible to accurately predict the kinds of work the named insured will do during the policy period. However, the insurance company usually assumes all of the named insured's workers compensation exposures during the policy period. As a result, it must estimate the proper classifications that apply at inception. It later confirms or revises those estimates based on information it receives during or after the policy period or based on a physical audit of the named insured's books and records.

The named insured's business or operations may change during the policy period, or the original premium estimates may not be accurate. In that case, this provision gives the insurance company the right to make any changes necessary that reflect the actual exposures. This provision can be enforced, and the ability to do so is well established through previous precedent and court decisions.

C. Remuneration

The estimated or deposit premium for each work classification is calculated by multiplying the premium basis by the rate for the code and classification that applies. Remuneration or payroll is the usual premium basis and includes all payroll and remuneration paid during the policy period. The remuneration for services falls into two categories:

1. All officers and employees who are engaged in the work that the policy covers

2. Other persons who are engaged in work that could make the insurance company liable under the policy's workers compensation part. The contract price for their services and materials can be used as the premium basis if the named insured does not have payroll records for these persons. An exception to this paragraph is that if the named insured can prove that the employers of these persons had proper workers compensation coverage in place on them for the work performed, premium is not charged from them under this policy.

Related Court Cases:

Contractor Was an Employee Rather than an Employer

Independent Trucker Was Not a Statutory Owner-Operator

Newspaper Delivery Persons Were Employees, Not Independent Contractors

Note:

Most workers compensation laws make a contractor liable for compensation payments to injured employees of uninsured subcontractors. This provision details what the insurance company should use to charge additional premium for the additional exposures that uninsured subcontractors cause.

Proof of workers compensation coverage usually means a certificate of workers compensation insurance or other evidence of workers compensation coverage for the subcontractor's employees. This provision also lets the insurance company charge a premium based on the contract price for the services and materials uninsured subcontractors provide if their actual payroll records are not available.

Workers Compensation and Employers Liability Insurance Policy Rating Considerations

Certificates of Insurance and Workers Compensation Insurance

D. Premium Payments

The named insured pays the premium when it is due, even if all or part of a workers compensation law is invalid.

E. Final Premium

The premium on the Information Page, schedules, and endorsements is estimated. The final premium is determined after the policy expires by using the actual payroll, the correct classifications, and rates that apply to the operations performed or work done. If the final premium calculated is more than the estimated premium, the insured pays the insurance company the difference. If the final premium calculated is less, the insurance company returns the excess to the named insured, subject to the highest minimum premium for the classifications that applies.

If the policy is cancelled, the final premium is determined in one of two ways:

1. When the insurance company cancels, the final premium is calculated pro rata, which charges only for the amount of time the policy was in force. The final premium can be no less than the pro rata share of the minimum premium.

2. When the named insured cancels, the final premium is calculated prorate but with a short rate surcharge that penalizes the named insured for the early cancellation. The final premium can be no less than the full value of the minimum premium.

F. Records

The named insured is responsible for keeping and maintaining records that the insurance company can use in calculating the final premium. When asked by the insurance company for copies of the records, the named insured must supply them.

G. Audit

It is not enough for the named insured to provide records to the insurance company. The insurance company also be permitted to audit all records relating to this policy. Examples of items that must be available are ledgers, journals, registers, vouchers, contracts, tax reports, and payroll and disbursement records. The programs that store and retrieve data must also be provided. Information may be hard copy or electronic, but the insurance must be able to access them.

Audits are to be conducted during regular business hours and can occur for up to three years after the policy ends. Information gathered will be used by the insurance company to develop the final premium. The insurance rate service organization working with the insurance company has the same rights under this provision.

PART SIX–CONDITIONS

A. Inspection

The insurance company has the right to inspect workplaces to determine if it wants to provide insurance. It may also inspect to assist it in developing the premium and to offer recommendations that it believes would improve conditions. However, this is not a health and safety inspection. There is no warranty to the named insured, its employees, or the general public that the operation is a safe workplace. This paragraph applies to both the insurance company and any insurance service organization.

B. Long-Term Policy

The insurance company may issue a policy with a term of more than one year and 16 days. However, all policy provisions apply as if a new policy is issued on each annual anniversary that the policy is in effect.

Note: A policy may be issued for any length of time up to three years. A policy with a term of less than one year and 16 days is treated as a single year policy. Otherwise, the policy period is divided into twelve-month units, and the first or last unit of less than twelve months is treated as a short-term policy. Each such unit is subject to provisions such as minimum premium, short rate cancellation, etc.

C. Transfer of Your Rights and Duties

The named insured is not permitted to transfer its rights or duties under this policy unless the insurance company's agrees in writing that it can do so. The only exception is when the named insured is an individual person. If that person dies, the legal representative of that named insured becomes an insured. This exception applies only if the insurance company is notified within 30 days after the date of death

Note: From the insurance company's point of view it is necessary to restrict the ability to assign rights and duties because underwriting is based on the specific management. Re-underwriting must take place when an ownership change takes place. Most other insurance coverage forms and policies have similar provisions.

D. Cancellation

Either the named insured or the insurance company may cancel the policy. Four conditions make up this provision.

1. When the named insured cancels the policy, it must do so by providing a written notice to the insurance company prior to the requested cancellation date.

2. When the insurance company cancels the policy, it must do so at least ten days’ in advance of the cancellation date and do so in writing. Mailing the notice to the named insured at the mailing address under Item 1. on the Information Page is sufficient to prove notice.

3. The date and the hour stated in the notice of cancellation the insurance company issues represent the date of cancellation.

4. When state law conflicts with these cancellation provisions, the state law provisions apply.

Note: Standard state-specific endorsements contain the cancellation notice period and other cancellation requirements.

E. Sole Representative

The first named insured under Item 1. on the Information Page acts on behalf of all insureds with respect to any policy changes, premiums, and notices of cancellation.

Note: More than one corporation or entity may be insured under a single policy if there is substantially common majority ownership. This policy provision is necessary when there are two or more insureds because only one legal entity usually carries out transactions with the company at any one time. The first named insured is responsible for policy maintenance issues like paying premiums and audits, requesting changes or endorsements, receiving return premiums, and giving or receiving notice of cancellation.