Revisions to North Carolina Basic Manual for Workers Compensation and Employers Liability
North Carolina Basic Manual for Workers Compensation and Employer Liability - Digital Edition
The following information is provided for your convenience and is not intended to provide an interpretation of state or federal law. Interpretation of state or federal laws pertaining to coverage issues is not within the jurisdiction of the North Carolina Rate Bureau (NCRB).
Workers Compensation and Employers Liability Coverage Insurance Policy
The standard policy is the preprinted policy that has been created by NCCI and approved by the North Carolina Commissioner of Insurance. The standard policy includes the Information Page (WC 00 00 01A) and endorsements. The standard policy is divided into three parts:
1. Part One – Workers Compensation Insurance
Workers compensation insurance is statutory coverage for employers subject to the workers compensation law of North Carolina. It provides benefits to employees for occupational diseases or work-related injuries.
Benefits may include payment of medical bills, lost wages, rehabilitation expenses, additional disability payments, and/or death benefits.
Benefits vary and are determined by state workers compensation laws and state occupational disease laws. Occupational disease is defined by state law. Generally it is an illness resulting from conditions related to a particular occupation. It excludes those diseases to which the general public is exposed.
An employer may also need coverage under certain federal acts. Coverage for federal acts may be provided by attaching the appropriate endorsement to the standard policy. To determine if coverage is necessary under federal acts, refer to applicable federal statutes.
The extent and limitations of liability under Part One depends on the benefits required by the workers compensation law of a state listed in Item 3.A. of the Information Page.
2. Part Two – Employers Liability Insurance
Employers liability insurance is designed to protect the employer against compensable claims for occupational diseases or work-related injuries not covered under North Carolina workers compensation laws.
Employers liability coverage applies only if the injury or death of an employee arises out of and in the course of employment.
The standard policy includes employers liability insurance written with workers compensation insurance.
Employers liability insurance written without workers compensation insurance may be permissible where there is no law or regulation that prohibits the issuance of such a policy.
Standard Limits for Employers Liability Insurance are:
Accident- Each Accident
Disease - Each Employee
Disease - Policy Limit
Refer to the appropriate laws for information related to employer’s liability insurance coverage.
3. Part Three – Other States Insurance
Other states insurance is intended to cover operations in other states that are unknown or unexpected at the time the policy is written, but that could develop during the policy period.
This insurance is provided by listing the states where an employer later may have an exposure under Item 3.C. of the Information Page of the policy.
If the carrier is not authorized to make compensation payments directly to persons entitled to them in a particular state, the carrier will make the payments indirectly by reimbursing the employer for all compensation and benefits required of the employer under such state law.
Other States Insurance coverage is not available in states:
With a Monopolistic State Fund – a workers compensation plan established by state law as the only provider of workers compensation insurance in a given state. Private insurers are not permitted to write workers compensation coverage in states where Monopolistic State Funds exist.
Where the carrier elects not to write this coverage.
Other States Insurance does not provide coverage for exposures under the USL&HW Act.
NOTE: For assigned risk policies, Other States Insurance coverage is limited. Refer to the Residual Market Limited Other States Coverage Endorsement (WC 00 03 26 A) for additional information.
The Information Page is the portion of the standard policy that contains identifying data such as name and address of the insured, policy period, coverages, and premium.
1. Item 1: Name, Address, and Other Workplaces of Insured
The insured is the employer covered by an insurance policy. In Item 1, the exact name of the employer insured and the appropriate legal status of the entity must be shown. If separate legal entities are insured on a single policy, consistent with the North Carolina Basic Manual rules, separately show the complete name of each insured employer and indicate each employer’s legal entity status.
List all usual workplaces of the insured that are to be covered by the policy. Include the respective Federal Employer’s Identification Number (FEIN) for each entity included on the policy.
Refer to Rule 3-A-5 for additional information.
2. Item 2: Policy Period
Policy period is the length and time an insurance policy is in effect. The effective date and expiration date must be shown in this section.
A normal policy period is defined as one year, although a policy may be issued for up to, but not exceeding, three years. North Carolina Basic Manual rules are based on a policy period of one year. A one-year policy is a policy issued for a one-year period or a period not exceeding one year and 16 days.
3. Item 3.A.: State Laws Designated in the Policy
Insurance for operations conducted in a state is provided by listing the state in Item 3.A. of the Information Page.
Additional states may be added after the effective date of the policy. Refer to Rule 3-A-20 for additional information.
“If any” is a term used to express that, at the time of policy issuance, a state is covered if exposure develops for the state during the policy period. This term is used to identify potential exposure; however, no payroll is reported at the time of issuance of the policy.
NOTE: The USL&HW Act is not entered in Item 3.A. of the Information Page. Attach the Standard Longshore and Harbor Workers’ Compensation Act Coverage Endorsement (WC 00 01 06 A) to the standard policy to provide this insurance.
4. Item 3.B.: Employers Liability Insurance – Limits of Liability
Separate limits of liability apply to employers liability coverage for Bodily Injury by Disease and Bodily Injury by Accident and must be shown separately in this section. The limits are:
Standard limits may be increased at the insured’s option. Refer to Rule 3-A-13 for additional information.
a. Bodily Injury by Accident
Bodily Injury by Accident (each accident limit) applies to all bodily injury resulting from a single accident: standard limit is $100,000.
b. Bodily Injury by Disease
Bodily Injury by Disease is represented by two limits:
• Employee Limit
Each Employee Limit is the maximum amount of damages that a carrier will pay for a single employee during the policy year: standard limit is $100,000.
• Policy Limit
Policy Limit is an aggregate limit that applies to all bodily injury occurring from disease during the term of the policy. An aggregate limit is the maximum amount of damages that a carrier will pay during the policy year: standard limit is $500,000.
5. Item 3.C.: Other States Insurance
Other States Insurance covers operations that are unknown or unexpected at the time the policy is written but that could develop during the policy period.
This coverage is provided by listing the states where an employer may later have an exposure under Item 3.C. of the Information Page of the policy. If during the policy period the insured is conducting operations in a state listed under item 3.C., and if the carrier agrees to continue coverage, the carrier may add that state to Item 3.A. and remove it from Item 3.C.
Monopolistic state fund states or a state where the carrier will not provide this coverage should not be named or designated in Item 3.A. and/or 3.C.
Refer to Rule 3-A-17 for additional information.
6. Item 3.D.: Endorsements and Schedules
This section of the Information Page includes reference to endorsements and schedules applicable to the policy. Completion of this section may be omitted so long as the list of the policy’s schedules and endorsements appear somewhere on the Information Page.
7. Item 4: Classifications and Premium Basis
For all businesses, the following is included, separately, by state:
Classification wording (with or without footnotes)
Any caption that precedes several related classifications
Underlined, capitalized classification wording may be used instead of the entire wording
If classification wording does not describe the business, substitute wording may be used.
Refer to Rule 1-C for additional information.
b. Premium Basis
Premium is based on the estimated payroll for the policy period.
Premium is displayed on the Information Page, rounded to the nearest dollar.
Refer to Rule 2-A for additional information.
For each classification listed, the rate must be stated under the heading “Rate per $100 of Payroll.”
In North Carolina, for voluntary policies, the final rates are those filed by or on behalf of the carrier. Rates are comprised of two elements: an advisory loss cost and a loss cost multiplier.
In North Carolina, for assigned risk policies, rates are filed on behalf of the carrier by the North Carolina Rate Bureau.
Refer to Rule 3-A-1 for additional information.
d. Estimated Annual Premium
Estimated Annual Premium is the total premium the policy is expected to earn in a given year. It is calculated prior to policy inception by:
Estimating annual payrolls for each classification,
Dividing by 100,
Then multiplying the results by the rate for each classification, by state.
Where appropriate, other premium adjustments may be included in the estimated premium calculation. These adjustments may include experience rating, schedule rating, premium discounts, etc.
Refer to Rule 3-A-9 for additional information.
e. Expense Constant
The expense constant is a premium charge that is applied to every policy regardless of premium size. It helps cover the expenses common to issuing, recording, and auditing a policy. The expense constant is shown on the Information Page of the policy.
Refer to Rule 3-A-10 for additional information.
f. Minimum Premium
The minimum premium is the lowest policy premium that is required in order to provide insurance under the standard policy. The minimum premium must be shown on the Information Page of the policy.
Refer to Rule 3-A-15 for additional information.
The standard workers compensation and employers liability insurance policy may be endorsed to change or provide additional coverages. These are:
1. Voluntary Compensation Insurance (Not a federal coverage)
Under many state workers compensation insurance laws, an employer is not required to provide benefits for certain types of employment such as domestic, farm, and casual workers.
Voluntary Compensation Insurance enables the employer to offer the equivalent of workers compensation and employers liability coverage for these types of employment.
It is permitted for volunteers only where allowed by state law.
To include coverage, use the Voluntary Compensation and Employers Liability Coverage Endorsement, WC 00 03 11 A.
2. Railroads & Railroad Employees (NC Workers Compensation Act)
The North Carolina Workers’ Compensation Act does not apply to railroads or railroad employees. This exclusion includes the operation of interstate railroads: railroads operated on an interstate basis, such as logging railroads and street railroads in Mecklenburg County. The law does apply to street railroads outside of Mecklenburg County.
Policies involving railroad operations (including street railroad operations in Mecklenburg County only) must be written at approved rates. The Standard Workers Compensation and Employer’s Liability Policy must be endorsed so that employees outside the scope of the Workers’ Compensation Act will, in the case of injury, be offered Voluntary Compensation Insurance. The endorsement should also provide that the standard limit of liability apply under the Employers Liability Insurance for those excluded employees. If a higher limit is desired, the Table for Increased Limits is to be used to calculate the increased premium. Refer to Rule 3-A-13.
This procedure applies to all policies involving railroad operations (including street railroad operations in Mecklenburg County only) whether or not other operations coming within the scope of the North Carolina Workers’ Compensation Act are covered.
3. United States Longshore and Harbor Worker’s Compensation Act (USL&HW)
(US Code 33 USC 901 et seq.)
This Act is a federal law that provides for payment of compensation and other benefits to eligible maritime employees.
Such employees may include longshore workers, harbor workers, ship repairers, shipbuilders, shipbreakers, and other employees engaged in loading, unloading, repairing, or building a vessel.
It applies to these employees while working on navigable waters of the United States. Navigable waters are usually defined as those that form a continuous highway for interstate or international commerce.
It also applies to these employees while working on any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other area adjoining such navigable waters. These adjoining areas are usually used for loading, unloading, repairing, dismantling, or building a vessel.
It does not cover masters or members of the crew of a vessel. Refer to the Admiralty Law section for more information.
The standard policy is used to insure statutory obligation of an employer to provide benefits required by the USL&HW Act.
Do not designate the USL&HW Act in Item 3.A. of the Information Page.
To include coverage, use the Longshoremen’s and Harbor Workers’ Compensation Act Coverage Endorsement, WC 00 01 06 A.
Classifications for insurance under USL&HW are listed in the Classifications section of this manual.
4. Extensions of the USL&HW Act such as:
a. Defense Base Act (US Code 42 USC 1651 et seq.)
This Act extends the provisions of the USL&HW Act to employers and their employees on overseas military bases and on other overseas locations under public works contracts being performed by contractors with agencies of the United States government.
Employees who are not United States citizens may be exempted from coverage on approval of a waiver by the United States Secretary of Labor.
To include coverage, use the Defense Base Act Coverage Endorsement, WC 00 01 01 A.
b. Outer Continental Shelf Lands Act (US Code 43 USC1331 et seq.)
This Act extends the provisions of the USL&HW Act to employers and their employees exploring for natural resources on the Outer Continental Shelf of the United States.
This area is generally described as all submerged lands lying between the seaward boundary of the states’ jurisdiction and the seaward boundary of federal jurisdiction.
To include coverage, use the Outer Continental Shelf Lands Act Coverage Endorsement, WC 00 01 09 C.
c. Civilian Employees of Non-appropriated Fund Instrumentalities Act (US Code 5 USC 8171 et seq.)
This Act extends the provisions of USL&HW Act to civilian employees of non-appropriated fund instrumentalities such as post exchanges and service clubs of the United States Armed Forces.
To include coverage, use the Nonappropriated Funds Instrumentalities Act Coverage Endorsement, WC 00 01 08 A.
5. The Migrant and Seasonal Agricultural Worker Protection Act (US Code 29 USC 1801 et seq.)
This Act makes agricultural employers, agricultural contractors, and agricultural associations liable for bodily injuries sustained by an employee due to intentional violation of the Act or regulations under the Act.
The premium for this endorsement is based on a rate determined by the carrier from its evaluation of the exposures presented by the risk.
To include coverage, use the Migrant and Seasonal Agricultural Workers Protection Coverage Endorsement, WC 00 01 11.
6. Admiralty Law (Jones Act or Merchant Marine Act of 1920) Program I or Program II
(US Code 46 USC 30101 et seq. and 50101 et seq.)
a. For Waters Subject to Admiralty Jurisdiction:
Masters and members of the crews of vessels are subject to admiralty law and not covered under the state workers compensation laws or the USL&HW Act.
If injured, masters and members of the crews of vessels have the right to sue their employers for damages in the admiralty courts where the proceeding is in the nature of an employer’s liability suit. They also have the right to transportation, wages, maintenance, and cure.
Every person employed on board a vessel is considered to be a seaman if connected with the operation or welfare of the vessel while in navigable waters.
Navigable waters are usually defined as those that form a continuous highway for interstate or international commerce.
If Admiralty Law coverage is provided, USL&HW Act coverage may also be necessary.
Standard Limits for Employers Liability Insurance are:
Accident- Each Accident
Disease - Each Employee
Disease - Policy Limit
There are two programs to provide insurance under admiralty law: Program I and Program II. These programs are described below.
To include coverage for Program I, use the Maritime Coverage Endorsement, WC 00 02 01 B.
To include coverage for Program II, use the Maritime Coverage Endorsement, WC 00 02 01 B, and the Voluntary Compensation Maritime Coverage Endorsement, WC 00 02 03.
b. For Waters Not Subject to Admiralty Jurisdiction:
An insured may conduct operations on waters not subject to admiralty jurisdiction.
Insurance for such operations must be provided by the standard policy and endorsement forms and is subject to the rules that apply to statutory workers compensation insurance.
Admiralty classifications and rates for Program II apply to these operations:
The advisory loss cost for each classification is shown after its code number in the Miscellaneous Values section.
The assigned risk rate of each classification is the authorized rate approved by the North Carolina Commissioner of Insurance for use by the carrier.
7. Federal Employers’ Liability Act (FELA) Program I or Program II (US Code 45 USC 51 et seq.)
The Federal Employers’ Liability Act applies to employees of interstate railroads.
There are two programs to provide insurance under FELA: Program I and Program II.
If FELA coverage is provided, USL&HW Act coverage may also be necessary.
Under Part One- Workers Compensation Insurance, Program I provides statutory liability under workers compensation law of any state designated in Item 3.A. of the Information Page.
Under Part Two – Employers Liability Insurance, Program I provides employers liability for damages under admiralty law or FELA, subject to a standard limit.
Liability for transportation, wages, maintenance, and cure can be excluded by endorsement.
Program II provides the same coverage as Program I, but with the addition of Voluntary Compensation.
Under Program II, the laws of negligence do not apply. The insurance carrier will offer a settlement of a claim strictly according to the statutory benefits provided in the workers compensation law. This law is designated in the voluntary compensation endorsement, which is attached to the policy as if the claim were subject to this law.
If the offer of settlement is rejected, employers liability then applies to this claim, with the same standard limit as for Program I
Standard Limits for Employers Liability Insurance are:
Accident- Each Accident
Disease - Each Employee
Disease - Policy Limit
To include coverage for Program I, use the Federal Employer’s Liability Act Coverage Endorsement, WC 00 01 04 A.
To include coverage for Program II, use the Voluntary Compensation and Employer’s Liability Coverage Endorsement, WC 00 03 11 A.
For each policy issued or endorsed that includes coverage
for North Carolina in Item 3.A. of the Information Page, the carrier must
electronically submit to the Bureau the policy, to include the information
as shown on the policy Information Page (new and renewal), each endorsement,
each cancellation, and each reinstatement.
If the Bureau finds that a policy requires correction(s) to conform to manual rules or classifications, the carrier will be notified.
For detailed reporting requirements, refer to NCRB’s Data Reporting Guide.
2. Endorsement and/or Form Filing
Endorsements are forms that change the provisions of the standard policy. The available endorsements are contained in the Forms Manual and are available on NCRB’s website.
Independent carrier form and endorsement filings can be filed directly with the North Carolina Department of Insurance only in specific instances. These instances can include:
Notices (including billing forms, cancellation, non-renewal, reinstatement terms, terrorism disclosures, etc.)
Binders and/or Policy Jackets
Certificates of Insurance
Declaration Pages/Information Pages
Form with logo changes only
Large Deductible Programs
Any carrier that wishes to file an endorsement not included in the above list, which changes the terms and conditions of the policy, must file a request with the NCRB. The Bureau will review, and if appropriate, make a filing on behalf of all carriers with the North Carolina Department of Insurance. This process must be completed in order to comply with North Carolina statutes which require a “Standard Policy Form” to be used in North Carolina.
3. Experience Rating Modification
The Bureau has the responsibility for calculating and issuing experience rating modifications for those qualifying risks whose operations are conducted in North Carolina. The Bureau will endeavor to calculate and issue experience rating modifications at least ninety (90) days before the effective rating date.
The carrier of record and the producer of record are provided access to the experience rating worksheet(s).
Additional parties may be allowed access to the experience rating worksheet(s), subject to Bureau approval, if authorized in writing by the employer.
The Bureau will charge a fee for each experience rating worksheet sent to a nonmember of the Bureau (i.e. self-insured funds, self-insured entities or self-insured groups) or to promulgate an experience modification for an employer not insured by a member of the Bureau.
Each insurer transacting or offering to transact workers compensation insurance in North Carolina may offer deductibles to employers. Deductible coverage is effected by attaching the Benefits Deductible Endorsement (WC 00 06 03) to the policy. An insurer is not required to offer a deductible to an insured.
Deductibles may be available for total combined medical and indemnity benefits in amounts of $100, $200, $300, $400, $500, $1,000, $1,500, $2,000, $2,500, and $5,000 per claim. A selected deductible applies on a per claim basis. The deductible must apply separately to each claim for bodily injury by accident or disease.
The claim is paid by the insurer, which will then be reimbursed by the insured for any deductible amounts paid by the carrier. The insured is liable for reimbursement up to the limit of the deductible chosen. The payment or nonpayment of deductible amounts by the employer to the insurer is treated under the policy insuring the liability for workers compensation in the same manner as payment or nonpayment of premiums.
The applicable loss elimination ratio (LER) represents the percentage of losses removed when an employer is responsible for losses up to the deductible amount. LERs vary by deductible amount and hazard group. The LER is a key variable used in determining the policy premium credit.
In the voluntary market, the policy premium credit is calculated using the published LER in the Miscellaneous Values section in combination with the appropriate insurer expenses. In the assigned risk market, the applicable premium reduction percentage for the policy premium credit is that percentage corresponding to the appropriate deductible amount and hazard group as shown in the Miscellaneous Values section. The insurer will determine the policy premium credit for the deductible coverage and apply that credit to the policy manual premium, which is determined before the application of any experience or schedule rating modification, premium discounts, or any retrospective rating plan.
The applicable hazard group is determined from the Table of Classifications by Hazard Group, according to Appendix E. The hazard group assignments are based on the classification, subject to any deductible amount, that produces the largest amount of estimated workers compensation standard premium for North Carolina.