Workers Compensation and Employers Liability Insurance Policy Overview

< Back

Workers Compensation and Employers Liability Insurance Policy

INTRODUCTION

The National Council on Compensation Insurance, Inc. (NCCI) developed WC 00 00 00 B-Workers Compensation and Employers Liability Insurance Policy. It covers the named insured’s statutory liability under various state workers compensation laws or acts. It provides defined benefits to employees for injuries they sustain or diseases they contract that arise out of and in the course of their employment.

All states have laws that require such protection for workers and those laws prescribe the amount and duration of the benefits provided. Employers Liability covers an employer’s common law or tort liability for employee injuries that fall outside the scope of the state laws or acts. This liability is separate and distinguished from the liability that workers compensation laws impose.

The policy provides the mandatory benefits that the various state laws prescribe and require for accidental work-related injuries that occur in the course of employment, subject to its terms and conditions. It must be emphasized that the injury must arise from and be related to the injured worker’s job duties. Coverage also applies to the related costs for disease or death that occur as a result of the accident.

There are times when the employed worker’s injury is not compensable under workers compensation or occupational disease laws. In those cases, Employers Liability coverage responds to the injured worker’s allegations of negligence on the employer’s part, subject to its terms, conditions, limitations, and exclusions. The coverage the basic policy provides may be broadened, restricted, clarified, or made to comply with specific state regulatory requirements by using a variety of available endorsements.

POLICY MAKE-UP

The basic Workers Compensation and Employers Liability Insurance Policy has the following two parts:

  • WC 00 00 01 A-Information Page – This is the equivalent of the declarations used in other lines of insurance.
  • WC 00 00 00 B-Workers Compensation and Employers Liability Insurance Policy – A brief summary of the policy content follows below.

WC 00 00 00 A-WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY SUMMARY

The policy consists of one general section and six parts, as follows:

General Section

This section states that the insurance policy, the Information Page, and all endorsements and schedules in effect on the inception date represent the insurance contract between the insured employer and the insurance company. It defines who the named insured is and explains how the workers compensation and employers liability laws of the state apply. It also explains the meaning of workplace locations and defines “State” to mean states of the United States of America and the District of Columbia.

Part One-Workers Compensation Insurance

Part One explains how the insurance provided applies and outlines payments the insurance company is obligated to make. These include benefits required by law, costs to defend suits brought against the named insured for benefits the insurance pays, and additional costs incurred as a result of a claim or legal action. It explains what happens if other insurance covers the same claim and details payments the named insured must make. It also includes procedures to follow if there are any recoveries from others and summarizes the statutory provisions that apply if there is a loss.

Part Two-Employers Liability Insurance

Part Two explains what employers liability insurance is, how it applies, and outlines payments that are the insurance company’s responsibility. It provides a detailed list of exclusions and circumstances where coverage does not apply. It explains when the insurance company defends the insured for suits brought due to damages the insurance pays and details additional costs the company pays as part of any legal action it defends. It explains what happens if other insurance covers the same claim and defines meanings of the terms and limits that apply to this coverage. It also details the named insured’s obligations in case of recoveries from others responsible for a covered loss and summarizes each party’s requirements before an action can be brought against the insurance company.

Part Three-Other States Insurance

Part Three explains how this coverage applies when one or more states are entered in the space provided on the Information Page for this coverage. Coverage applies to any state listed on the Information Page. However, coverage does not apply to any other state unless the named insured reports the start of any work in that state within 30 days of the date that the work begins. The named insured must immediately inform the insurance company of operations that begin in any state listed in this section on the Information Page.

Part Four-Your Duties if Injury Occurs

Part Four outlines the named insured’s duties and responsibilities with respect to both the injured employee and the insurance company if an injury takes place that this insurance may cover.

Part Five-Premium

Part Five explains how the insurance company uses its manuals, rules, rates, rating plans, and classifications to calculate the premium it charges. It explains the method it uses to determine the classifications that apply and outlines how remuneration (in most cases) is used to develop the premium. It requires that the named insured pay premiums when they are due and provides details on how to determine the final premium. It also details the records the named insured must maintain and the way premium audit uses those records to determine the final premium the named insured owes.

Part Six-Conditions

Part Six outlines the insurance company’s right to inspect workplaces at any time. It clarifies that such inspections are not an obligation and do not serve as safety inspections. It explains that the named insured cannot transfer any of its rights or duties without the insurance company’s written consent. It details how either party may cancel the policy as well as how to handle long-term policies. It also requires that the first named insured on the Information Page act on the behalf of all insureds with respect to all policy transactions.

ENDORSEMENTS

WC 00 00 00 B can be amended and customized by numerous available endorsements that change or modify coverage, exclude coverage, and/or effect changes in terms and conditions. Some of these endorsements are required in certain states because of the differences in the workers compensation laws and statutes of those states. These endorsements fall into the following four broad general categories:

  • General Endorsements – These endorsements are broad and general and usually apply in most states. They address common issues that affect workers compensation coverage regardless of the state involved.
  • General State Endorsements -These endorsements are usually the same subject matter as general endorsements but are amended to reflect the specific issues that apply in a given state. This is because of differences in the workers compensation laws and statutes of those states.
  • Subject Matter Endorsements – These endorsements address general subject areas. Examples are Federal Coverages and Exclusions, Maritime Coverages and Exclusions, Premium Endorsements, and Retrospective Premium Endorsements.
  • Subject Matter State Endorsements – These endorsements are subject matter endorsements that are amended to address differences in the workers compensation laws and statutes of those states.

UNDERWRITING AND CLASSIFICATION

Workers compensation underwriting focuses on the types of employee activity, previous loss experience, and loss prevention activities.

RATING

Properly rating workers compensation begins with accurately classifying operations and properly assigning payroll to each classification. A mistake in either can lead to significant errors.