CASUALTY TYPES & BONDS · 5 MIN READ

Workers Compensation Coverage and Experience Rating

The standard Workers Compensation and Employers Liability policy is divided into distinct coverage parts. Coverage A (Part One) pays whatever benefits the state statute requires — medical, indemnity, rehabilitation, death — without regard to fault and without a dollar limit stated in the policy. Coverage B (Part Two), Employers Liability, responds when an employee or a third party brings a common-law negligence suit that the statute does not absorb: dual-capacity suits, third-party-over actions, consequential bodily injury, and loss-of-consortium claims. Part Three, Other States Insurance, extends coverage to operations in states listed on the Information Page, whose Item 4 carries the classification codes and rates. A Voluntary Compensation endorsement (WC 00 03 11) pays statutory-level benefits to workers not actually subject to the WC law. Geography and industry create special cases. In monopolistic-fund states the employer must buy statutory benefits from the state fund, which sells no employers liability — so the private market fills the gap with a Stop-Gap Employers Liability endorsement attached to the CGL or package policy. Federal statutes displace state systems for certain workers: the USL&H Act for longshore and harbor workers, the Jones Act for seamen, FELA for railroad workers, the Defense Base Act for overseas government contractors, and the Black Lung Benefits Act for coal miners; each requires its own endorsement or program. Large employers may self-insure with regulatory approval, posting a surety bond or equivalent security sized to outstanding indemnity and medical reserves plus a loading factor for adverse development. Pricing revolves around the NCCI Experience Rating Plan. The Experience Modification Factor compares the employer's actual losses — split into primary and excess components with stabilizing values — against expected losses computed from class-code payroll and industry loss rates, over a three-year window that excludes the most recent policy year so losses are mature. A mod of 1.00 is industry-average; below 1.00 earns a credit, above 1.00 a debit. Retrospective rating plans go further, adjusting the final premium after the term based on the insured's own losses within minimum and maximum bounds.