Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00)
1. What the form is
The Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00, is the standard policy form used in most states to provide workers' compensation and employers' liability insurance. It is a cornerstone document for businesses, outlining the agreement between the insurer and the employer for coverage related to employee injuries and illnesses. The policy is typically divided into several key parts: Part One covers the employer's statutory obligations under the workers' compensation laws of the states listed in the policy's Information Page (often form WC 00 00 01, which acts as the declarations page). This includes benefits for medical expenses, lost wages, rehabilitation, and death benefits as required by state law. Part Two addresses employers' liability, which protects the employer against civil lawsuits filed by employees for work-related injuries or illnesses that are not covered by workers' compensation statutes, such as claims alleging employer negligence. The policy also contains general sections defining terms and conditions, as well as sections detailing the insured's duties if an injury occurs, how premiums are determined, and various other conditions of the insurance.
2. Classes of business it applies to
This policy form is broadly applicable across nearly all classes of business and industries where an employer-employee relationship exists. Workers' compensation is mandatory for most employers in all states, making this policy essential for businesses ranging from small retail operations and restaurants to large manufacturing plants, construction companies, and service providers. For example:
- A construction company would use this form to cover its laborers, carpenters, and other on-site workers for injuries sustained from falls, machinery accidents, or other construction-related hazards.
- A restaurant would need this policy to cover its kitchen staff, servers, and hosts for injuries like burns, slips and falls, or repetitive motion injuries.
- A manufacturing facility would rely on this form to protect against claims from assembly line workers who might suffer injuries from equipment or develop occupational illnesses from exposure to materials.
- Office-based businesses, such as accounting firms or software developers, also require this coverage for employees who might experience injuries like carpal tunnel syndrome or slip and fall accidents within the office.
Essentially, any business with employees, regardless of size or industry, will typically need this policy to comply with state laws and protect itself from financial losses due to work-related injuries or illnesses.
3. Special considerations
Several special considerations are important when using the WC 00 00 00 policy form:
- Statutory Nature of Coverage (Part One): Part One - Workers Compensation Insurance is strictly statutory. The benefits payable are those prescribed by the workers' compensation law of the state(s) listed in Item 3.A. of the Information Page. The policy automatically provides the benefits required by the laws of those states.
- Employers Liability (Part Two) Limits: Unlike Part One, Part Two - Employers Liability Insurance has specific limits of liability shown on the Information Page (Item 3.B.). These limits typically apply per accident for bodily injury by accident, per employee for bodily injury by disease, and a policy limit for all bodily injury by disease claims. It's crucial to ensure these limits are adequate, as claims falling under employers' liability can be substantial.
- Other States Insurance (Part Three): This part provides coverage for incidental exposures in states not listed in Item 3.A. However, if an employer begins work in a new state not listed in 3.A., they must promptly notify the insurer to ensure coverage. This is critical for businesses that expand operations or take on temporary projects in new states.
- Monopolistic States: Some states (e.g., North Dakota, Ohio, Washington, Wyoming) operate monopolistic state funds for workers' compensation. In these states, employers must purchase workers' compensation coverage directly from the state fund. The WC 00 00 00 policy's Part One would not apply in these states. However, employers may still need "stop-gap" employers' liability coverage, which can sometimes be endorsed onto the CGL policy or provided via a specific endorsement to the WC policy for exposures in these states.
- Federal Exposures: Certain employees may fall under federal jurisdiction, such as those covered by the Longshore and Harbor Workers' Compensation Act (USL&H), the Defense Base Act, or the Federal Employers' Liability Act (FELA). Standard WC 00 00 00 often excludes these exposures, requiring specific endorsements (e.g., WC 00 01 06 A for USL&H) to provide coverage.
- Leased or Temporary Employees: When businesses use leased or temporary employees from a staffing agency, specific endorsements like the Alternate Employer Endorsement (WC 00 03 01 A) may be necessary on the staffing agency's policy to protect the client company from claims by those workers.
- Voluntary Compensation: For employees not legally required to be covered by workers' compensation law (e.g., domestic workers in some states, or in states with employee number thresholds not yet met), an employer can choose to provide coverage by adding the Voluntary Compensation and Employers Liability Coverage Endorsement (WC 00 03 11 A).
4. Key information for agents and underwriters
Agents and underwriters must pay close attention to several aspects of the WC 00 00 00 policy:
- Accurate Classification and Payroll: Proper classification of employees based on their job duties and accurate reporting of payroll are fundamental for correct pricing. Misclassification can lead to significant premium discrepancies upon audit. The policy premium is an estimate, and the final premium is determined after a payroll audit.
- Risk Assessment: Underwriters will scrutinize the nature of the business operations, safety programs, loss history, and management's commitment to safety. Industries with higher inherent risks (e.g., construction, manufacturing with heavy machinery, roofing) will generally have higher premiums.
- Employers Liability Limits: Agents should discuss the adequacy of employers' liability limits with clients. While Part One benefits are set by statute, Part Two claims can be for large, unpredictable amounts. Increasing these limits is often relatively inexpensive but can provide crucial protection.
- Coverage Gaps: Be vigilant for potential coverage gaps. This includes ensuring all operating states are correctly listed in Item 3.A. or covered under Item 3.C. (Other States Insurance), addressing federal act exposures, and understanding how the policy responds to claims from leased or temporary employees. For instance, if an employer has operations in a monopolistic state, standard employers' liability under Part Two may not apply, necessitating stop-gap coverage.
- Endorsements: A wide array of endorsements can modify the WC 00 00 00 policy. Agents and underwriters need to be familiar with common endorsements such as those for waiver of subrogation (WC 00 03 13), alternate employer (WC 00 03 01 A), and those excluding or including specific individuals like sole proprietors, partners, or officers (WC 00 03 08, WC 00 03 10).
- Information Page (WC 00 00 01): This page is critical as it contains the specifics of the coverage, including the named insured, policy period, covered states, liability limits for Part Two, and a list of all endorsements. Accuracy here is paramount.
- Premium Audit: The policy includes provisions allowing the insurer to audit the insured's records to determine the final premium. Insureds must maintain accurate records of payroll, and agents should explain the audit process to their clients.
- Experience Modification Factor: For eligible employers, an experience modification factor (mod) will significantly impact the premium. The mod is based on the employer's historical loss experience compared to other businesses in the same industry. A mod below 1.00 results in a premium credit, while a mod above 1.00 results in a debit.