Workers' comp limits explained: statutory and employers' liability

One policy, two parts

A workers’ compensation policy is two kinds of insurance in one.

• Part One, workers’ compensation insurance, pays the benefits required of the employer by the workers’ compensation law of the states listed on the policy. An injured employee’s medical bills and lost wages are examples.
• Part Two, employers’ liability insurance, pays damages the employer legally owes for an employee’s injury or disease, where those are not benefits under the workers’ compensation law. A lawsuit is the usual example.

The standard form is the Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00), published by the National Council on Compensation Insurance (NCCI). One edition, WC 00 00 00 A, can be read on the Minnesota Department of Commerce’s site. A subcontractor’s own policy may be a different edition, and its wording is what counts. The policy’s first page, the Information Page (WC 00 00 01), is where the states and the limits are filled in.

On a certificate the two parts share one row, headed WORKERS COMPENSATION AND EMPLOYERS’ LIABILITY. One half of that row has no dollar figure. The other half has three.

Why the certificate says PER STATUTE

Part One has no dollar limit. Pennsylvania’s public rating manual says so directly: the standard policy has no limit of liability for Part One. The policy promises the benefits the workers’ compensation law requires, so the amount is whatever the statute says.

That is why the ACORD 25, the standard certificate of liability insurance, has a box labeled PER STATUTE where a limit would otherwise be. A mark in it says statutory workers’ compensation is in place. There is no number to compare with your requirement, and a subcontract that asks for “statutory limits” is asking for a mark in this box. If the box beside it, OTHER (printed as OTH-ER), is the one marked, ask the agent what it stands for on this policy.

The three employers’ liability figures

Part Two does have limits. They are printed under the PER STATUTE box, each starting with E.L.

The shorthand 100/500/100 follows the order on the policy’s Information Page: each accident, disease policy limit, disease each employee. The certificate lists the policy limit last. So a policy written as 100/500/100 reads down the certificate as $100,000, $100,000, $500,000. Match each figure by its label, not by its position.

The standard limits, and what contracts ask for

The amounts in the last column of that table are the standard limits as Pennsylvania’s manual states them: what Part Two carries unless higher limits are bought. Higher limits cost more premium. Pennsylvania’s table includes $500,000 for each of the three and $1,000,000 for each of the three. It prices the second at 1.4 percent of the policy’s total premium, as that rule defines it. Another state’s rules may differ, so ask your broker what applies in yours.

Contracts ask for different amounts. Three published examples:

• Federal cost-reimbursement contracts require at least $100,000, under FAR 28.307-2. The rule makes an exception for states with a monopolistic fund, where private carriers may not write workers’ compensation.
• A sample provision published by California’s Department of General Services asks for employer’s liability limits of $1,000,000.
• The public health department of King County, Washington asks contractors that have employees for $1,000,000 of stop gap or employers’ liability coverage.

The AIA’s A101-2017 insurance exhibit leaves the three amounts blank for the parties to fill in. What goes in the blanks is a decision for you, your broker and your attorney. Our sample requirements show an example matrix, with $500,000 for lower-risk trades and $1,000,000 for the rest. Review it with your broker and attorney before any of it goes into a subcontract.

Why an umbrella asks for a minimum underneath

An umbrella policy can add limits on top of employers’ liability, as it can on top of general liability and auto. The umbrella’s insurer sets the limits it expects on the policies beneath it. Chubb, for example, publishes a $1,000,000 minimum for employers’ liability under one of its umbrella products.

Under the ISO Commercial Liability Umbrella Coverage Form (CU 00 01), those underlying policies must be kept in force without a cut in coverage or limits. If one is not, the umbrella still stands, but it pays only as if the required limit were there, and the policyholder is left with the difference. The condition is quoted and explained in this trade press article. An umbrella written on another form may say something different, so the umbrella’s own wording is what counts.

When your subcontract asks for an umbrella, ask the agent what employers’ liability limit the umbrella requires beneath it. Then check that the workers’ compensation policy carries it.

North Dakota, Ohio, Washington and Wyoming

In four states an employer buys workers’ compensation from a state fund and not from a private insurer: North Dakota, Ohio, Washington and Wyoming. Washington’s Department of Enterprise Services names the other three as monopolistic states like its own. North Dakota’s fund says state law does not allow private insurers to write workers’ compensation there. An employer that qualifies may be allowed to self-insure instead: Washington’s Department of Labor and Industries describes self-insured employers alongside its state fund.

Employers’ liability for work in these states is arranged separately, with a private insurer, under the name stop gap coverage. Two public documents show where it can be written. The King County terms above accept, in states with monopolistic state funds, a stop gap endorsement to the general liability policy. Washington’s Department of Enterprise Services buys a private workers’ compensation policy for employees who work in other states, the other three fund states included. It describes employer’s liability, which it also calls stop gap, as part of that policy. Ask the subcontractor’s agent which policy its stop gap coverage is on and what the limit is.

For a subcontractor in one of these states, ask for two things. The first is the fund’s own proof of coverage. North Dakota’s, for example, is called a Certificate of Payment. The second is evidence of the stop gap limit, which you can ask the agent to state on the liability certificate. The King County terms ask for stop gap or employers’ liability as one item, which a subcontractor in a fund state can meet. Ask your attorney how your own subcontract should word it.

A subcontractor from another state

The Information Page lists states in two places. Item 3.A names the states whose workers’ compensation law Part One applies to. Item 3.C, other states insurance, names states where the policy will respond if work begins there.

Item 3.C is a backstop, and Part Three of the policy form linked above says when it applies. Say the employer starts work in a 3.C state after the policy begins and is not insured or self-insured for that work. The policy then applies as though that state were listed in 3.A, and the employer is to tell the insurer at once. Work already under way when the policy begins, in a state not listed in 3.A, is not covered unless the insurer is told within thirty days.

Item 3.C is not meant for a job already planned. Pennsylvania’s manual says work known or expected in a state is not to be covered through it. It also says other states coverage is not available in a state with a monopolistic state fund. For work in North Dakota, Ohio, Washington or Wyoming, ask the subcontractor what that state’s fund requires, and what the subcontractor has in place.

The certificate has no box for states, so a mark in the PER STATUTE box does not tell you which state’s statute. When a subcontractor comes to your job from another state, ask the agent for the states in Items 3.A and 3.C. The agent can name them in the description of operations box or send the Information Page. Whether your state accepts another state’s policy for the work is a matter of state law, so put that question to your broker.

What to check on the certificate

• The workers’ compensation row names an insurer and a policy number, and its dates cover the time the subcontractor is on your site.
• The PER STATUTE box is marked.
• Each of the three E.L. figures meets the figure in your subcontract. Compare them label by label.
• The box that asks whether any proprietor, partner, executive officer or member is excluded. A yes means an owner is outside the policy, which matters for a small crew: see ghost policies.
• If your subcontract asks for a waiver of subrogation: the SUBR WVD column on this row, and then the endorsement behind it. Some states restrict this waiver, and that guide names them.
• If an umbrella is required: the E.L. figures meet the limit that umbrella requires beneath it.
• If the subcontractor is from another state: the agent has named the states in Items 3.A and 3.C, and yours is among them.
• If the work or the subcontractor is in North Dakota, Ohio, Washington or Wyoming: the state fund’s proof of coverage, and the stop gap limit.

The free certificate checker reads one certificate against a standard set of subcontractor requirements, with no account. This guide covers the United States and is general information, not insurance or legal advice.