Rule 5 - Policy and Endorsements

Revision History

Type

Effective Date

Circular

Notes

All

07/01/2021

C-21-12

Revisions to North Carolina Basic Manual for Workers Compensation and Employers Liability

Original

04/01/2016

C-16-6

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).

A. Standard Policy (WC 00 00 00 C):

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.  

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.  

 

Accident- Each Accident

$100,000

Disease - Each Employee

$100,000

Disease - Policy Limit

$500,000

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.  

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.

B. Information Page (WC 00 00 01A)

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

a. Classifications

For all businesses, the following is included, separately, by state:

Exception:

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.

c. Rates

For each classification listed, the rate must be stated under the heading “Rate per $100 of Payroll.”

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:

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.

C. Additional Coverages

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)

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.)

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.)

b.   Outer Continental Shelf Lands Act (US Code 43 USC1331 et seq.)

c.   Civilian Employees of Non-appropriated Fund Instrumentalities Act (US Code 5 USC 8171 et seq.)

5. The Migrant and Seasonal Agricultural Worker Protection Act (US Code 29 USC 1801 et seq.)

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:

 

Accident- Each Accident

$100,000

Disease - Each Employee

N/A

Disease - Policy Limit

$100,000

b. For Waters Not Subject to Admiralty Jurisdiction:

7. Federal Employers’ Liability Act (FELA) Program I or Program II (US Code 45 USC 51 et seq.)

 

Accident- Each Accident

$100,000

Disease - Each Employee

N/A

Disease - Policy Limit

$100,000

D. Bureau Requirements:

1. Reporting/Corrections

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:

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.

    1. The carrier of record and the producer of record are provided access to the experience rating worksheet(s).

    2. Additional parties may be allowed access to the experience rating worksheet(s), subject to Bureau approval, if authorized in writing by the employer.

    3. 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.

E. Deductible Insurance

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.