Workers' Compensation and Employer's Liability
Exclusive remedy and no-fault
Workers' compensation is a state statutory system that pays benefits for work-related injury or occupational disease without regard to fault; in exchange the employee surrenders the right to sue the employer, known as the exclusive remedy. Benefits are set by statute rather than by the policy limit: medical care, disability income (temporary total, temporary partial, permanent partial, permanent total), death benefits for dependents, and rehabilitation.
The policy's three parts
Part One, Workers' Compensation, pays all benefits the employer is legally required to pay under the applicable statute - it has no dollar limit. Part Two, Employer's Liability, covers the employer's tort liability for injuries outside the statutory system, with limits per accident, per employee for disease, and a policy limit for disease. Part Three, Other States Insurance, extends coverage to states listed. Premium is payroll-based, adjusted by classification, experience modification, and a final audit.
Traps
- Statutory benefits are not capped by the Part Two limits; Part Two only responds to tort suits.
- Sole proprietors, partners, and LLC members are generally excluded unless they elect coverage; corporate officers may elect exclusion in some states.
- Federal systems - FELA for railroad workers, LHWCA for longshore workers, and the Jones Act for seamen - are not state workers' compensation.
- Third-party-over and dual-capacity suits fall under Part Two, not Part One.
Rule of thumb
First ask whether the claim is a statutory benefit or a liability claim. Statutory benefits go to Part One with no dollar cap; an employer being sued in tort goes to Part Two, where the limits apply.