10.3 Part Two: Employers Liability

Property & Casualty Insurance Exam

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1 Introduction

0.1 About the Property & Casualty Exam 0.2 How to Use This Course

2 Chapter 1: Insurance Fundamentals

1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components

3 Chapter 2: Property Insurance Concepts

2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits

4 Chapter 3: Dwelling Policies

3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions

5 Chapter 4: Homeowners Policies

4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements

6 Chapter 5: Personal Auto Policy

5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP

7 Chapter 6: Liability Insurance Concepts

6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies

8 Chapter 7: Commercial Property Insurance

7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)

9 Chapter 8: Commercial General Liability

8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions

10 Chapter 9: Commercial Auto Insurance

9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms

11 Chapter 10: Workers Compensation

10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage

12 Chapter 11: Other Commercial Lines

11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance

13 Chapter 12: Insurance Regulations and Ethics

12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions

10.3 Part Two: Employers Liability

Key Takeaways Explain This Topic AI

Part Two (Coverage B) is liability coverage for injury-related suits the workers' comp statute does NOT bar; standard NCCI limits are $100,000 / $500,000 / $100,000

The three limits are: $100,000 bodily injury by accident (each accident), $500,000 bodily injury by disease (policy limit/aggregate), $100,000 bodily injury by disease (each employee)

Coverage B answers third-party-over actions, dual-capacity suits, consequential bodily injury, and loss-of-consortium claims arising from a covered injury

Monopolistic-state funds (OH, ND, WA, WY) provide Coverage A only; employers buy STOP GAP employers liability by endorsement on their CGL policy

Part Two does NOT pay statutory comp benefits, punitive/exemplary damages, or claims arising from the employer's intentional acts or illegal employment

Last updated: June 2026

Why Part Two Exists

The exclusive remedy bargain blocks most employee suits, but not all injury-related liability. Part Two (Coverage B), Employers Liability , pays sums the employer becomes legally obligated to pay as damages for a covered work-related bodily injury when the workers' comp statute does not bar the action. Unlike Part One, it is true liability insurance — it has limits.

Feature Part One (Coverage A) Part Two (Coverage B)
Coverage Statutory comp benefits Employers liability
Limit Unlimited Limited
Standard limit n/a $100,000 / $500,000 / $100,000
Triggered by The state act A lawsuit outside the act
The Three Standard Limits

The NCCI standard limits are written as $100,000 / $500,000 / $100,000 and each number means something different — a guaranteed exam point:

Limit Label Applies To
$100,000 Bodily Injury by Accident – Each Accident Per-accident cap for injury by accident
$500,000 Bodily Injury by Disease – Policy Limit Aggregate for all disease claims
$100,000 Bodily Injury by Disease – Each Employee Per-employee cap for disease

Limits can be raised; many commercial buyers carry $500K/$500K/$500K or $1M/$1M/$1M, often to satisfy umbrella attachment requirements.

What Coverage B Actually Pays For
1. Third-Party-Over Actions

The most-tested scenario. The worker collects comp, sues an outside party, and that party drags the employer back in:

Worker hurt by a defective forklift; collects workers' comp
Worker sues the forklift manufacturer (a third party — not barred by exclusive remedy)
Manufacturer files a third-party-over claim against the employer , alleging poor maintenance/training
Coverage B defends the employer and pays any damages within limits
2. Dual-Capacity Doctrine

The employer is sued in a role separate from being the employer :

Second Capacity Example
Product manufacturer Forklift-maker's own employee hurt by the company's forklift sues as a consumer
Medical provider On-site clinic negligently treats the worker
Landlord/owner Premises defect in a building the employer owns injures the worker
3. Consequential Bodily Injury & 4. Loss of Consortium

A family member sues for their own loss flowing from the worker's injury — e.g., a spouse's loss of consortium (companionship and services) or consequential injury from caring for the worker. These derivative claims are covered by Part Two even though the worker's own claim runs through Part One.

Key Part Two Exclusions

Part Two does not cover:

Statutory benefits payable under Part One
Punitive or exemplary damages
Liability from the employer's intentional/deliberate act to injure
Injury to a worker knowingly employed in violation of law (e.g., illegal child labor)
Obligations under federal acts (USL&H, FELA) unless specifically endorsed
Monopolistic States and Stop Gap

In the four monopolistic states — Ohio, North Dakota, Washington, Wyoming — the state fund sells Coverage A (statutory benefits) but not Coverage B. The fix is stop gap coverage , an employers-liability endorsement added to the employer's Commercial General Liability (CGL) policy.

State Fund Provides Stop Gap (on CGL) Provides
Coverage A statutory benefits Coverage B employers liability defense and damages

Exam Key: Monopolistic state fund = Coverage A only → buy stop gap on the CGL to fill the employers-liability hole.

How the Limits Actually Trigger

Knowing which limit applies to a given loss is a favorite question. Walk the facts through three questions:

Accident or disease? A single traumatic event is "by accident"; a condition developing from exposure over time is "by disease."

One event or the whole policy term? The "by accident" limit applies per accident ; the disease policy limit is an aggregate for the entire term.

How many employees? The disease per-employee limit caps any one worker's disease claim within that aggregate.

Loss Limit Tested Why
One worker hurt in a fall, third-party-over suit $100,000 accident — each accident Single traumatic event

Five workers develop lung disease from a solvent $500,000 disease policy limit Aggregate across all disease claims

One of those five, examined alone $100,000 disease — each employee Per-employee disease cap
Coverage B vs. the CGL Employee Exclusion

A key reason employers liability exists: the standard Commercial General Liability (CGL) policy excludes bodily injury to an employee arising out of employment. Without Part Two, a third-party-over action or dual-capacity suit would fall into that CGL gap and leave the employer naked. Part Two is purpose-built to fill exactly the hole the CGL carves out — which is also why, in monopolistic states, the stop-gap endorsement is added back onto the CGL.

Worked Scenario

A delivery firm's driver is hurt when a contractor's defective loading ramp collapses. The driver collects comp benefits under Part One. He then sues the ramp manufacturer . The manufacturer files a third-party-over claim against the delivery firm , alleging its drivers overloaded the ramp. The delivery firm's Part Two responds: it defends the firm and pays any judgment up to the $100,000 bodily injury by accident — each accident limit. None of this touches Part One, which has already paid the statutory benefits and may now pursue subrogation against the manufacturer for what it paid.

Exam Key: Part One pays the worker the statutory benefits; Part Two pays lawsuit damages the employer owes when someone reaches the employer outside the no-fault bargain.