(December 2011)

INTRODUCTION

The National Council on Compensation Insurance, Inc. (NCCI) developed WC 00 00 00 B–Workers Compensation And Employers Liability Insurance Policy. It is the standard policy in most states. It is used to provide insurance for a named insured employer and covers its statutory liability under the various state workers compensation laws or acts. It provides defined benefits to employees for injuries sustained or diseases contracted 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 the named insured against its common law or tort liability for employee injuries that fall outside the scope of the state laws or acts that are separate and distinguished from the liability workers compensation laws impose.

The policy provides the mandatory benefits that various state laws prescribe and require for accidental work-related injuries that occur in the course of employment, subject to its terms and conditions. The injury must arise from and be related to the injured worker's job duties. Coverage also applies to related costs for disease or death that occur as a result of the accident. If the employed worker's injury is not compensable under workers compensation or occupational disease laws, Employers Liability coverage responds to the injured worker's allegations of the named insured's negligence, 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.

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

Note: This analysis is of WC 00 00 00 B. This edition is effective 07/31/11. The one significant change from WC 00 00 00 A is in bold print.

The policy opens by explaining that, in return for the named insured's premium payment (and subject to all of its terms and conditions), the insurance company agrees to provide the coverages indicated.

GENERAL SECTION

A. The Policy

The policy includes the Information Page and all endorsements and schedules 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 requires that a written endorsement is needed to acknowledge any such surrender of 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. This is because the wording in the brochure is or might be different than the language in the policy itself. The human resources manager discusses the material with Linda and informs her that the brochure only describes the coverage and only the policy contains the coverage that actually applies.

B. Who Is Insured

The employer identified in Item 1 of 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 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 either be named or have a separate policy that covers the operations for which the spouse is the employer.

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.

Related Article: Workers Compensation and Employers Liability Insurance Policy Available Endorsements and Their Uses

C. Workers Compensation Law

The term "workers compensation law" means the workers compensation law(s) and the occupational disease law(s) of each state or jurisdiction under Item 3.A. on the Information Page. It includes any changes in those laws enacted during the policy term. It does not include any federal workers compensation or occupational disease law(s) or any terms or provisions of any non-occupational disability benefits law.

Note: Older versions of this policy included detailed citations of the various state laws. This is no longer necessary because workers compensation and occupational disease laws and statutes are readily available for review and are generally well known. This also means that the changes in law that occur during the policy period are not endorsed to the policy as in the past. Since this paragraph specifically excludes federal workers compensation, occupational disease, or similar laws, special endorsements are available and must be used to add any such coverage.

Related Article: Workers Compensation and Employers Liability Insurance Policy Available Endorsements and Their Uses

Note: This paragraph allows the named insured to cover its obligation under workers compensation and occupational disease laws in territories as well as in states listed under Item 3.A. on the Information Page. The insurance requirements and arrangements for the territories of Puerto Rico, the United States Virgin Islands, American Samoa, and Guam must be reviewed to determine if they are eligible for coverage.

D. State

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

Note: All states of the United States and the District of Columbia have enacted workers compensation laws, acts, or statutes.

E. Locations

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

Note: This policy covers the named insured's total liability as established under any state workers compensation law. Some states have laws that require this total liability to be insured 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 is using a wrap-up program and all contractors working 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 from the subcontractor's.

Example: Joe's Printing subcontracts with General Builder for the Glossy New Building project. All workers on the Glossy New Building project are covered under a wrap-up workers compensation program. Joe cannot include any individual workers compensation premium in his costs because the wrap-up covers all WC injuries. Joe can remove the project payroll from his policy by attaching WC 00 03 02–Designated Workplaces Exclusion Endorsement.

Note: 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.

Related Articles:

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

Overview of Wrap-up Programs

PART ONE–WORKERS COMPENSATION INSURANCE

A. How This Insurance Applies

The insurance provided covers bodily injury by accident or bodily injury by disease, including death that results from either.

1. The accident that causes the bodily injury or death must occur during the policy term.

2. Disease. Employment conditions must cause or aggravate bodily injury by disease. The employee's last day of exposure to the employment conditions that caused or aggravated it must be within the policy term.

Note: Coverage applies on an occurrence basis. The basis of insurance coverage for occupational disease conforms to the provisions of occupational disease laws. These generally impose liability on the employee's last employer with whom he or she was harmfully exposed.

B. We Will Pay

The insurance company agrees to pay benefits promptly but only those due from the named insured required by the workers compensation law that applies.

Notes: This is the basic insuring agreement and indemnity provision and is probably the most important section in the policy. It means the policy insures the employer's entire liability under the designated law or laws. Specific benefits are not listed because coverage depends on the state workers compensation law that applies, including any revisions or amendments that might affect a particular loss.

Coverage under this part is for unlimited dollar amounts for any specific accident as well as to any number of accidents that occur during the policy period. This is because of the way state workers compensation laws are structured and arranged. They provide for unlimited medical benefits to injured employees. Although disability benefits are limited to a given percentage of pre-accident wages, they are paid for the injured worker's lifetime or the lifetime of his or her surviving spouse.

By implication, this provision recognizes that the number of employees may vary and the employer may engage in new or different operations. In either case, the intent is to cover all operations and employees and respond to the full extent of every statutory liability the law imposes on the employer, except for payments it must make as outlined in section F. below.

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 this insurance coverage pays. It also has the right to investigate and settle any claim or legal action. However, it is not obligated to defend any legal action that this insurance does not cover.

Note: The insurance company provides this defense provision at its own expense. It is similar to provisions in most liability coverage forms and policies. The company retains and compensates legal counsel as necessary to properly represent the employer in lawsuits, administrative and judicial proceedings, and appeals. It can select legal counsel it deems appropriate as part of its right to defend and investigate and settle claims. It also assumes defense costs without any monetary limitation. The company's duty to defend is broader than its duty to indemnify. Unless the claim's allegations clearly remove it from the scope of coverage, the company must defend until it is clearly established that it is not covered.

D. 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:

1. All reasonable expenses the named insured incurs at the company's request. However, this does not include loss of earnings.

2. Premiums for bonds to release attachments or for appeal bonds up to amounts that this insurance pays

3. Costs of litigation assessed against the named insured

4. Interest on judgments as the law requires but only until the insurance company offers to pay the amount due

5. Any and all expenses the insurance company incurs

E. Other Insurance

The insurance company does not pay more than its proportion or share of costs and benefits that this insurance, other insurance, or self-insurance covers. All shares are equal until the loss is paid, except for cases where there are specific limits that apply. If the limits of any other insurance policy or self-insurance are exhausted, all remaining insurance pays in equal shares until the loss is completely paid.

Notes: There may be cases where more than one workers compensation policy applies to a specific accident or occupational disease. In others, another arrangement (such as self insurance) may apply. This section addresses the way coverage applies when more than one coverage may apply to a claim. However, the main reason is to specify that different carriers or self-insurers pay losses in equal shares.

Employers in all jurisdictions must either purchase insurance to cover their full liability or qualify as a self-insurer 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 the self-insurance qualification process). 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 named insured is responsible for certain payments that exceed the benefits the applicable workers compensation law provides. Examples are penalties for violations, criminal activities, or other reasons considered uninsurable as a matter of public policy. The insurance company does not pay in these cases. The named insured must pay:

1. When it engages in serious and willful misconduct

2. When it knowingly employs any person where prohibited by law

3. When it does not comply with health or safety regulations or laws

4. If it discharges, coerces, or otherwise discriminates against any employee and violates the workers compensation law in the process

The named insured must reimburse the insurance company for any amounts the company pays on the named insured's behalf that are more than the workers compensation law prescribes.

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 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 reimbursed the carrier for those additional payments because it violated state hiring laws.

G. Recovery from Others

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

Note: This is similar to the rights of recovery provisions in other coverage forms and policies. Most workers compensation laws provide 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.

Note: The insurance company obtains the employee's rights of recovery against third parties to the extent of the benefits it paid. WC 00 03 13–Waiver of Our Right to Recover from Others Endorsement waives the 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 will not subrogate against.

Related Article: Workers Compensation and Employers Liability Insurance Policy Available Endorsements and Their Uses

Related Court Case: Insurer's Recovery Under Lien Capped At Claimant's Net Recovery

H. Statutory Provisions

This section contains six statements that apply to the insured employer as required by law in the states where coverage is provided.

1. The insurance company is considered to have received notice of an injury to an employee at the same time that the named insured did.

2. The named insured's bankruptcy, insolvency, or default does not relieve the insurance company of its duties when a covered injury occurs.

3. The insurance company is responsible for paying benefits to any person entitled to them. Such persons (or an agency authorized by law) may enforce those duties against the named insured, the insurance company, or both.

4. With respect to the workers compensation law or laws that apply, jurisdiction over the insurance company is treated the same as jurisdiction over the named insured. The company is obligated to the same decisions made against the named insured by the law, subject to policy provisions that do not conflict with the law.

5. This policy automatically conforms to any part of any workers compensation law that applies to:

·         Benefits payable under this insurance

·         Special taxes, payments made to security funds (or other special funds), and assessments the company must pay by law

6. Any portion of the policy that conflicts or disagrees with the workers compensation law in a given jurisdiction is automatically changed to conform to and comply with that law.

Nothing in any of these statements relieves the named insured of its duties under this policy.

Note: Only those provisions actually required by law in a given state are made part of the policy, and only with respect to the coverage that applies in that state. For example, the right of "direct action" against the company (under item 3. above) does not apply in any state that does not have a direct action statute that applies.

PART TWO–EMPLOYERS LIABILITY INSURANCE

Note: 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 and Part Two applies to common or tort law or other damages for which it is liable.

A. How This Insurance Applies

Employers liability insurance is coverage for bodily injury by accident or bodily injury by disease, including death that results from either. It is subject to five conditions:

1. The employee's bodily injury must arise out of and in the course of employment by the named insured.

2. The work the employee is doing at the time of incurring a bodily injury does not have 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. Coverage for bodily injury by accident requires that the bodily injury must take place during the policy term.

4. Coverage for bodily injury by disease requires that the conditions that relate to the named insured's employment must cause or aggravate the disease. The employee's last day of exposure to the conditions that cause or aggravate any bodily injury caused by disease must be during the policy term.

5. Any suit 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.

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. Where the law permits recovery for such damages, the company is responsible for damages:

1. That the named insured is responsible for to a third party because of a claim or legal action against it by that third party to recover damages claimed against that third party due to or that results from an injury to the named insured's employee

2. For care and loss of services

3. For consequential bodily injury to a brother, sister, parent, child, or spouse of the injured employee. This is subject to a requirement that the damages are direct consequences of a bodily injury incident that arises out of and occurs during the course of employment by the named insured

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

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. "Damages" is not a defined term but a generally accepted legal meaning from Black's Law Dictionary is:

"A pecuniary (financial) compensation or indemnity, which may be recovered in the courts by any person who has suffered loss, detriment, or injury, whether to his person, property, or rights, through the unlawful act or omission or negligence of another."

The kinds of damages covered are not meant to be inclusive. They simply illustrate the primary categories where these claims normally fall. This includes so-called "third party over" claims made against the employer by a third party sued by an injured employee.

Example: Mike, an employee of MasonryIsUs, was injured on a construction site. While carrying some hollow concrete block, he tripped over some pipes that fell from a pile of pipes improperly stacked by employees of Bartleby Plumbing. He was entitled to both workers compensation benefits from MasonryIsUs and to 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.

In some states, a spouse, relative, or other persons in a close relationship with an injured employee may separately claim damages against the employer for care, loss of services, companionship, or consortium. This is an example of an exception to the "exclusive remedy" that workers compensation laws normally provide.

Some state workers compensation laws specify that workers compensation is the only remedy available to injured employees and their spouses, relatives, and personal representatives. Laws in other states may not be as comprehensive and restrictive and persons other than the employee may have causes of action against the employer in some cases. These causes of action are usually based on alleged negligence on the insured employer's part and on the same no-fault theory that applies to workers compensation.

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 one 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.

Part Two does not cover true no-fault workers compensation laws, like the United States Longshore and Harbor Workers Compensation Act (USL&HWCA) because they compensate on a no-fault basis. Part One may provide 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 in addition to the applicable state or territory laws listed under Item 3.A.

C. Exclusions

Coverage does not apply to the following:

1. Any liability assumed under a contract. However, this does not apply to warranties that the named insured will do its work in a workmanlike way.

2. Any punitive or exemplary damages due to bodily injury to any person whose employment violates the law

3. Any bodily injury to a person whose employment violates the law if the named insured (or any of its executive officers) actually knew that the employment was unlawful

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 they are either covered under Part One or are not covered at all. However, a specific employee not covered under a workers compensation law may sue the employer for damages. That claim may be covered under Part Two. For example, agricultural and domestic workers are usually excluded from workers compensation laws.

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 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 intentional torts of an employee.

6. Bodily injury that occurs outside the United States of America, its territories or possessions and Canada. However, coverage does apply to bodily injury sustained by citizens or residents of the United States of America or Canada 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.

8. Bodily injury to persons working subject to the:

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

WC 00 00 00 B does not have the reference to "of 1969" that was in WC 00 00 00 A.

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.

Note: This exclusion excludes coverage under specifically listed federal acts and clarifies policy language.

9. Bodily injury to persons who work 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.

Related Article: The Federal Employers' Liability Act (FELA) of 1908

10. Bodily injury to crewmembers or the master of any vessel

11. Fines or penalties required due to violating 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.

Related Article: The Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA)

D. We Will Defend

The insurance company has both the right and the duty to defend any claim, suit, or other legal action others bring against the named insured for damages that this policy covers. It does so at its own expense. It also has the right to investigate and settle any claim, suit, or other legal action. However, it does not have a duty to defend any legal action against the named insured that this policy does not cover. It also does not have a duty to defend or continue to defend after it pays the limit of insurance that applies.

Notes: This provision is similar to those in most liability coverage forms and policies and Part One of this policy. Some coverage forms and policies have provisions for the right to defend but not the duty to do so. This and similar defense provisions obligate the insurance company to retain and pay competent legal counsel to properly represent the named insured in lawsuits, administrative or judicial proceedings, and appeals. The company selects legal counsel it deems appropriate as part of its right to defend and has the right to investigate and settle claims. It assumes unlimited defense costs.

Like similar provisions in other liability coverage forms and policies, the company's duty to defend is broader than its duty to indemnify. Unless the allegations of a claim clearly remove it from coverage, the company must defend until the fact that it is excluded is established.

Employers liability insurance is subject to limits of liability as described in G. Limits of Liability under Part Two analyzed below. As a result, this section specifies that the company's duty to defend ends when the limits of insurance are used up. Defense costs are not included in determining when the appropriate limit is used up.

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:

1. All reasonable expenses the named insured incurs at the company's request. However, this does not include loss of earnings.

2. Premiums for bonds to release attachments or for appeal bonds up to amounts that this insurance pays

3. Costs of litigation assessed against the named insured

4. Interest on judgments as the law requires but only until the insurance company offers to pay the amount due

5. Any and all expenses the insurance company incurs

F. Other Insurance

The insurance company does not pay more than its proportion or share of costs and benefits that this insurance, other insurance, or self-insurance covers. All shares are equal until the loss is paid, except for cases where there are specific limits that apply. If the limits of any other insurance policy or self-insurance are used up, all remaining insurance pays in equal shares until the loss is completely paid.

Notes: This section primarily addresses payments by different insurance based on equal shares. The limits of liability referred to may occur in cases where an employer has a self-insured retention up to a certain amount and excess insurance above that amount.

The last sentence states that certain insurance or self-insurance may be used up. This refers to payments that equal the available limit of liability, funds not available due to a carrier's insolvency, or for some other reason. In those cases, any remaining insurance contributes to the loss in equal shares.

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: Disease is not bodily injury by accident unless it is a direct result of bodily injury by 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. 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. Bodily injury by disease does not include disease that is a direct result of a bodily injury by accident.

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 standard limits of liability for these coverages of:

• $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 this rules section.

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.

H. Recovery from Others

The insurance company has the named insured's rights to recover its payments made from anyone 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: Similar to the same provision in G. Recovery from Others under Part One, this is the subrogation provision that applies to employers' liability. The primary difference between the two is that this one does not give the company the named insured's employee's rights of recovery. It is limited to only giving the named insured's rights against third parties. This difference is necessary because the insurance company can only acquire the named insured's rights through the insurance policy.

WC 00 03 13–Waiver of Our Right to Recover from Others Endorsement waives the 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 will not subrogate against.

Related Article: Workers Compensation and Employers Liability Insurance Policy Available Endorsements and Their Uses

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. The amount owed has been determined by a trial and final judgment (or with the company's consent)

Nobody has the right to name the insurance company as a defendant in a legal action brought against the 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 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. Other states insurance applies only if there are one or more states listed under Item 3.C. on the Information Page.

Note: This clarifies 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. This includes even minimal contacts 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 that state is not insured elsewhere or covered by self-insurance), all policy provisions apply as if the state was listed under Item 3.A. on the Information Page.

Note: Coverage under Part Three is not intended to apply to ongoing operations. There is no premium charge, regardless of the extent of the insured's known operations or the number of states involved. A payroll or other premium basis is available only if the named insured actually initiates work or operations in those states. In those cases, the appropriate state rate or rates apply to the premium basis that actually develops during the policy period.

3. The insurance company reimburses the named insured for benefits required by the workers compensation laws of that state in cases where it is not permitted to pay benefits directly to injured persons entitled to them.

Note: The named insured must tell the insurance company any time it initiates work or operations in a state not listed under Item 3.A. on the Information Page. This part permits the insurance company that is not authorized to pay workers compensation benefits to an injured employee in a given state to pay them indirectly through the employer.

4. Coverage does not apply in states and in cases where the named insured has work in any state not listed under Item 3.A. on the Information Page as of the effective date. However, there is a grace period. The named insured has 30 days to notify the insurance company about the work.

Note: This provision strengthens the notification requirement so 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 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:

• 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 only in New York State but sends an employee to Indiana on business. While performing his job in the Hoosier State, he sustains serious 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 to the insurance company any injury that occurs that this insurance might cover. However, the obligations do not end there. Other required duties are:

1. Provide (or arrange for) immediate medical care and any required services but only as required by the workers compensation laws of the state where the injury takes place.

2. Provide the insurance company (or the insurance agent) the names and addresses of the injured person or persons and the same information for any witnesses to the injury. This is in addition to other information the company may need.

3. Promptly give the insurance company originals of all notices, demands, and any other legal papers that relate to an injury, claim, suit, or other legal proceeding.

4. Cooperate with and help the insurance company investigate, settle, or defend any claim, suit, or legal proceeding to the extent that it requests.

Note: There is no limit on the number of times the company may request cooperation and assistance. However, the frequency should not overly burden either party.

5. Do not do anything after an injury or claim occurs that interferes with or disrupts the insurance company's ability or rights to recover from others who might be liable for the loss.

6. Do not make any voluntary payments, assume any obligations, or incur any expenses without the insurance company's written approval. Doing so is at the named insured's cost and the company is not required to reimburse it for any unauthorized payments it made.

Note: These duties apply to any loss, injury, accident, or damages that occur and that Part One, Part Two, or Part Three cover.

Related Court Case: Notice To Workers Compensation Department Also Held To Be Notice To General Liability Department

PART FIVE–PREMIUM

Part Five 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 as they relate to the policy.

Related Article. Workers Compensation and Employers Liability Insurance Policy Rating Considerations

A. Our Manuals

The insurance company determines the premium charge based on its manuals of rules, rates, rating plans, codes, and classifications. It can change its manuals and apply those changes to this policy if they are authorized by law or by a government agency charged with regulating this insurance coverage.

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. It does so on behalf of its member companies in its capacity as a licensed rating or advisory organization. These manuals include:

As stated above, NCCI prepares and files manuals on be

• The Basic Manual for Workers Compensation and Employers Liability Insurance. It includes the rules, manual rates or loss costs, rating plans and values, codes, classifications, and premium discounts for all NCCI jurisdictions. 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. It 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 the experience modification is applied, the formula to calculate the modification, and the numerical values and factors used in that formula.
• The Retrospective Rating Plan Manual for Workers Compensation and Employers Liability Insurance. It 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.

half 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 rate 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 classification changes or corrections are handled.

Rule changes usually apply only to 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.

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 others acting 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: While it is not always possible to accurately predict the kinds of work the named insured will do during the policy period, 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 received during or after the policy period or based on a physical audit of the named insured's books and records.

If the named insured's business or operations change during the policy period (or if it appears that the original premium estimates were not accurate at the time they were made), this provision gives the carrier 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 applicable 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 engaged in the work that the policy covers

2. Other persons 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. However, this paragraph does not apply if the named insured proves that the employers of these persons had proper workers compensation coverage in place on them for the work performed.

Notes: In most cases, the premium for each classification is usually based on payroll multiplied by a rate per $100 of payroll but payroll or remuneration is not always the premium basis. For example, the premium charge for taxi companies in some states is based on an assumed amount of remuneration per cab driver, not on the actual remuneration received. In another example, domestic servants are charged for on a "per capita" basis, such as $500 per employee per year.

Since payroll is the most common premium basis, the NCCI Basic Manual for Workers Compensation and Employers Liability Insurance thoroughly describes what "remuneration" is. It includes all payroll and any other type of remuneration either paid (or that becomes payable) during the policy period for business services rendered. It usually includes commissions, bonuses, and non-cash compensation for services (but not tips, group insurance contributions, or severance pay). This provision also states that premium is normally based on all officers and employees whose work is part of the operations the policy covers that is subject to the workers compensation law. In some cases, executive officers of a corporation may elect to not be subject to the workers compensation law.

This provision also states that the premium basis includes remuneration paid to "other persons engaged in work" that could lead to a covered workers compensation loss. 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 allows the company to charge a premium based on the contract price for the services and materials uninsured subcontractors provide if their actual payroll records are not available.

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.

Notes: This acknowledges the possibility that certain provisions of workers compensation laws may be unconstitutional under the terms of a state constitution or the United States Constitution. Some early workers compensation statutes were declared unconstitutional because they allowed taking an employer's property without "due process" or deprived the parties of the right to a jury trial, among other reasons.

Most state workers compensation laws are not subject to attack on these constitutional grounds today but this provision acknowledges that certain provisions of a workers compensation law may be invalid on constitutional or other grounds. The "full faith and credit" clause of the United States Constitution (Art. IV, Sec. 1) is an area of continuing concern. It requires a state to have a "legitimate interest" in a compensable injury if its law is to be enforced or recognized by another state.

E. Final Premium

The premium on the Information Page, schedules, and endorsements is estimated. The final premium is determined after expiration 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. If the company cancels, the final premium is pro rata, based on the amount of time the policy was in force but not less than the pro rata share of the minimum premium.

2. If the named insured cancels, the final premium is more than pro rata. It is based on the time the policy was in force, increased by the short rate cancellation table and procedures. In this case, the final premium is not less than the minimum premium.

Notes: This provision complements B. Classifications under Part Five. It states that the premium on the Information Page or elsewhere is only an estimate. It also states that the actual premium the named insured pays during the policy period is the basis used to calculate the final premium. It emphasizes that the proper classifications and rates are applied to that premium basis to produce the final premium.

Once the final premium is determined, the policy provides for a final payment by either the named insured or the insurance company. This depends on amounts previously paid so that the premium paid for the policy equals the final premium. If the policy is cancelled before the expiration date, this provision states that the final premium will be calculated "pro rata" if the company cancels and "short rate" if the named insured cancels.

Pro rata and short rate premium refunds are described in the rules of the Basic Manual for Workers Compensation and Employers Liability Insurance. Pro rata cancellation charges the proportionate premium for each day of coverage. Short rate cancellation involves an increased charge to the named insured. Short rate cancellation allows the company to recoup a portion of its policy writing, inspection, and acquisition costs that accompany initial policy issuance.

F. Records

The named insured must keep and maintain records that provide the information the insurance company needs to calculate the final premium and provide copies of those records to it when requested to do so.

Note: These are primarily payroll records. This provision is similar to the records condition in most insurance coverage forms and policies.

G. Audit

The named insured must let the insurance company examine and audit all records that relate to the policy. These include (but are not necessarily limited to) ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs that store and retrieve data. Records may be in hard copy or electronic data form. Access to these records is for audit purposes and to determine the final premium.

Premium audits are usually done during regular business hours during the policy period and within three years after it expires. Information gained from the audit is used to determine the final policy premium. The rights of the insurance company under this provision also apply to insurance rate service organizations.

Note: The three-year period after expiration allows audits of smaller policies in cases where annual audits are not economically practical. The reference to insurance rate service organizations gives NCCI or other independent rate service organizations the opportunity to participate in audits and to determine that the classifications used in the policy are correct.

PART SIX–CONDITIONS

A. Inspection

The insurance company has the right to inspect workplaces at any time but it is not obligated to do so. These are not safety inspections. They relate only to the insurability of the workplaces and the premiums charged. The company may provide reports on the conditions found to the named insured and recommend changes to make. They are not intended to serve the same purpose as a person with the duty to provide for the health or safety of the named insured's employees or the public. For this reason, the company does not warrant that the named insured's workplaces are safe or healthful or that they meet applicable laws, codes, regulations, or standards. The rights of the insurance company under this provision also apply to insurance rate service organizations.

Note: The disclaimer provisions in this condition are largely based on state laws and are similar to those in other insurance coverage forms and policies. It relieves the insurance company of any liability that might result from its performing an inspection. The inspections are for the company's use, not the named insured's.

B. Long-Term Policy

If the insurance company issues a policy with a term of more than one year and 16 days, 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 a 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 may not transfer its policy rights or duties without the insurance company's written consent. If an insured is an individual person and dies (and the insurance company is notified of it within 30 days after the date of death), it treats the deceased insured's legal representative as the insured.

Note: From the company's point of view, restricting the ability to assign rights and duties is necessary because the nature or extent of the risk could change dramatically when a transfer or assignment occurs. Most other insurance coverage forms and policies have a provision similar to this.

D. Cancellation

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

1. The named insured may cancel the policy by mailing or delivering written notice to the insurance company in advance of the cancellation date requested in the notice.

2. The insurance company may cancel the policy by mailing or delivering at least ten days' advance written notice of the cancellation effective date. Mailing the notice to the insured at the mailing address under Item 1. on the Information Page is sufficient to prove notice.

3. Coverage ends on the date and at the hour stated in the notice of cancellation the insurance company issues.

4. If any cancellation provisions conflict with any law that affects insurance policy cancellations, the policy conforms to comply with that law.

Notes: The named insured and the insurance company both have the right to cancel the policy. This provision does not specify the reasons the company can cancel. However, most state laws require that its cancellation be based on certain reasons, such as nonpayment of premium, misrepresentation, or substantial changes in the risk. On the other hand, the named insured does not have to state a reason to cancel.

This provision also requires at least ten days notice by the company before the cancellation takes effect. Most state laws require longer periods and those longer periods apply automatically, as provided for in this subsection. 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 normally 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.