Form WC 20 01 01: Massachusetts - Benefits And Contract Endorsement
1. What the Form Is
The WC 20 01 01, titled "Massachusetts - Benefits And Contract Endorsement," is a mandatory endorsement that modifies the standard Workers' Compensation and Employers Liability Insurance Policy (WC 00 00 00) for employers in Massachusetts. Its primary purpose is to align the policy with specific Massachusetts legal requirements, particularly concerning the federal Terrorism Risk Insurance Act (TRIA) and its reauthorizations. This endorsement ensures that the policy provides coverage for workers' compensation losses resulting from certified "acts of terrorism" as defined under TRIA. It details how such losses are shared between the insurer and the federal government and includes important policyholder disclosures regarding the federal program, such as potential reimbursement for terrorism losses and statutory limitations of liability.
2. Classes of Business It Applies To
This endorsement is broadly applicable and generally mandatory for all employers in Massachusetts who are required to carry Workers' Compensation insurance under Massachusetts General Laws (M.G.L.) Chapter 152. This means it impacts a wide array of industries and business types operating within the Commonwealth. Examples include, but are not limited to:
- Construction companies (e.g., a general contractor working on commercial buildings in Boston)
- Manufacturing facilities (e.g., a medical device manufacturer in Worcester)
- Retail stores (e.g., a chain of supermarkets across Massachusetts)
- Healthcare providers (e.g., hospitals, clinics, and nursing homes)
- Educational institutions (e.g., private schools and colleges)
- Professional service firms (e.g., law firms, accounting firms in Springfield)
- Hospitality businesses (e.g., hotels and restaurants statewide)
Essentially, any business with employees in Massachusetts that is not legally exempt from carrying workers' compensation coverage will have this endorsement attached to its policy.
3. Special Considerations
Several important factors must be considered regarding the WC 20 01 01 endorsement:
- Mandatory Nature: This is not an optional endorsement; it must be attached to all new and renewal Workers' Compensation policies providing coverage in Massachusetts.
- TRIA Compliance: The core function of this endorsement is to ensure the policy complies with the provisions of the federal Terrorism Risk Insurance Act and its extensions. This includes how "Insured Losses" from certified acts of terrorism are defined and handled.
- Federal Program Dependency: The coverage specifics, including the federal government's share of losses and the program's continuation, are tied to the status and terms of the federal TRIA legislation. Changes at the federal level may impact the provisions or necessity of this endorsement over time.
- Definition of "Act of Terrorism": Coverage under this endorsement for terrorism-related losses is contingent upon the event being certified as an "act of terrorism" by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General, according to the criteria set forth in TRIA.
- Policyholder Disclosure: The endorsement serves as a formal notification to policyholders about the TRIA program, the potential for partial federal reimbursement of insured losses due to terrorism, and the statutory limitations on the insurer's liability for such events (e.g., if aggregate industry losses exceed $100 billion in a program year).
- Associated Premium: A specific premium charge is associated with the terrorism coverage afforded by this endorsement. This premium is typically identified separately on the policy's Information Page and is calculated based on factors like payroll.
Real-world example: If a declared act of terrorism occurs in Massachusetts causing widespread workplace injuries, this endorsement would govern how the affected employees' workers' compensation benefits are paid, incorporating the cost-sharing mechanisms of the TRIA program.
4. Key Information for Agents and Underwriters
- Pricing: The premium for the terrorism coverage provided through WC 20 01 01 is calculated based on total payroll and a specific terrorism rate determined by the rating bureau (WCRIBMA). This premium is applied after the Standard Premium and is not included in the Standard Premium for purposes of experience rating calculations. Agents should clearly communicate this separate premium component to insureds.
- Risk Assessment: While the endorsement itself is mandatory, the underlying risk of terrorism is a broader concern. However, for this specific endorsement, the primary underwriting task is to ensure its correct attachment and the proper calculation of the associated premium. The insurer's exposure to certified terrorism losses is mitigated by the federal TRIA backstop, subject to the insurer's deductible and program limits.
- Coverage Scope: This endorsement specifically addresses losses from certified acts of terrorism. It is crucial to understand that events not meeting TRIA's certification criteria, or certain acts of war, may be subject to different policy terms or exclusions.
- Underwriting Guidelines:
- Confirm WC 20 01 01 is attached to every Massachusetts Workers' Compensation policy.
- Verify the accuracy of the terrorism premium calculation and its display on the policy declarations.
- Understand that the WCRIBMA provides guidance and makes filings for such state-specific endorsements.
- Client Communication: Agents play a vital role in explaining the purpose and necessity of this endorsement to their clients. This includes clarifying that it is a legally mandated component for Massachusetts policies, outlining the nature of TRIA, and explaining how the federal program impacts their workers' compensation coverage for terrorism events. It is also important to note that this endorsement ensures that workers' compensation benefits required by Massachusetts law are provided even in the event of a certified act of terrorism, subject to TRIA's terms.
Real-world example for underwriters: When underwriting a new workers' compensation policy for a large employer in downtown Boston, the underwriter must ensure WC 20 01 01 is included and the terrorism premium is correctly calculated based on the employer's Massachusetts payroll, irrespective of the underwriter's assessment of the specific terrorism risk for that employer, as the TRIA premium is a pass-through mechanism for the federal program.