Policy guide · 9 min read

Workers Compensation Basics: Benefits, the WC and EL Policy, and Claims

Workers compensation basics for adjusters: no-fault and exclusive remedy, compensability, benefits, the WC and EL policy, federal laws, Texas non-subscribers.

Workers compensation is a no-fault system created by state law: an employee hurt on the job receives medical care and partial wage replacement without proving anyone was negligent, and in exchange generally cannot sue the employer. Adjusters handle these claims under state statutes and the standard Workers Compensation and Employers Liability Insurance Policy (WC 00 00 00). This guide covers the principles, the benefits, the policy, the federal programs that sit outside state systems, and how Texas and Florida differ.

The grand bargain: no-fault and exclusive remedy

No-fault. Benefits are set by statute and paid regardless of fault. An employee’s own carelessness, like tripping over a pallet she did not notice, neither bars nor reduces benefits. Narrow statutory defenses such as intoxication exist and vary by state.
Exclusive remedy. In return, the employee generally cannot sue the employer in tort, even for serious employer negligence. Many states allow a suit for injuries the employer intentionally caused, and some courts recognize a dual capacity exception when the employer injured the worker in a second role, such as manufacturer of the product involved.
Third parties remain liable. A worker rear-ended by a negligent motorist while making deliveries collects workers compensation and can still sue the motorist. The insurer then has subrogation rights to recover what it paid.

Workers compensation is the primary payer for a compensable injury. The worker pays no deductible, copay or coinsurance and does not use personal health insurance.

Compensability: arising out of and in the course of employment

Element	What it asks	Example
Arising out of employment	Is there a causal link between the injury and a risk of the job?	A sandblaster develops silicosis from silica dust
In the course of employment	Was the worker doing something job-related at the time, place and circumstances of injury?	A cook burned at the stove during a shift

Points that decide many files:

Occupational disease comes from exposure characteristic of the work. Ordinary diseases of life, such as the flu, are generally excluded.
Going-and-coming rule: the ordinary commute is generally not covered, but a special errand the employer directs (driving contracts to a client at night) usually is.
Employee or independent contractor: under the common-law right-to-control test, control over hours, routes and methods points to employment. Some states use other tests.
Statutory employer: a general contractor is generally liable for benefits owed to employees of an uninsured subcontractor. That is why contractors collect certificates of insurance, and why auditors charge premium on payments to uninsured subs.

Benefit types

Benefit	What it pays	Quick example
Medical	All reasonable care for the injury, with no cost sharing	Not subject to the waiting period
Temporary total disability (TTD)	A share of wages, often two-thirds of the average weekly wage (AWW), within state minimums and maximums	AWW $1,500 x 2/3 = $1,000, but a $950 state maximum caps it at $950
Temporary partial disability (TPD)	A share of lost wages while working at reduced pay	AWW $900, light duty pays $540: 2/3 x $360 = $240
Permanent partial disability (PPD)	Compensation for lasting impairment after recovery plateaus	Scheduled losses (thumb, eye, leg) pay set weeks; back injuries are rated to the whole body or by lost earning capacity
Permanent total disability	Ongoing benefits when the worker cannot return to suitable work	Amount and duration vary by state
Death and burial	Survivor benefits for dependents plus a separate burial allowance	Spouse benefits often end on remarriage
Vocational rehabilitation	Evaluation, job placement and retraining	A roofer with permanent restrictions retrains for lighter work

States typically impose a waiting period before wage-loss benefits start, then pay the waiting days retroactively once disability lasts long enough. The exact periods vary by state. With a 7-day wait, a 14-day retroactive rule and an $80 daily rate, a 20-day disability pays all 20 days: $1,600.

The WC and EL policy, Parts One to Six

The Information Page drives coverage: Item 3.A lists the states whose workers compensation law Part One covers, Item 3.B shows the employers liability limits, and Item 3.C lists other states for Part Three.

Part	Title	What adjusters need to know
One	Workers Compensation Insurance	Pays the benefits required by the workers compensation law of the 3.A states, with no dollar limit. Includes the duty to defend and recovery rights against third parties. The employer must reimburse amounts above regular benefits caused by its serious and willful misconduct, knowingly illegal employment, safety law violations, or discrimination that violates the workers compensation law.
Two	Employers Liability Insurance	Pays damages where the law allows a suit despite exclusive remedy: third-party-over actions, consequential injury claims by a spouse or family member, and dual capacity suits. Excludes personnel practices such as harassment and wrongful termination.
Three	Other States Insurance	If the employer starts work in a 3.C state after the policy begins, the policy applies as if that state were in 3.A. Work already underway in an unlisted state on the effective date needs notice within 30 days.
Four	Your Duties If Injury Occurs	Tell the insurer at once, provide required medical care, forward papers, cooperate, protect recovery rights, and make no voluntary payments except at your own cost.
Five	Premium	Premium comes from manual rates, classifications and payroll, with a final audit. Payments to uninsured subcontractors can be added to the premium basis.
Six	Conditions	Inspection, long-term policies, transfer of rights, cancelation (at least 10 days’ notice from the insurer unless state law requires more) and the first named insured as sole representative.

Standard employers liability limits

Limit	Amount	Applies to
Bodily injury by accident	$100,000	Each accident, however many employees are hurt
Bodily injury by disease	$500,000	Policy limit for all disease claims
Bodily injury by disease	$100,000	Each employee

If one boiler explosion produces Part Two damages of $60,000, $50,000 and $40,000 for three employees, the insurer pays $100,000, because one explosion is one accident.

The policy’s definition of workers compensation law excludes federal compensation laws, so federal exposures need endorsements.

Who provides coverage

Private insurers sell coverage everywhere except the four monopolistic fund states.
Monopolistic state funds in North Dakota, Ohio, Washington and Wyoming are the only legal source of state coverage there. Ohio and Washington allow qualified employers to self-insure; North Dakota and Wyoming do not.
Competitive state funds sell alongside private insurers and often act as insurer of last resort.
Self-insurance requires state approval and usually a bond or other security.
Second injury funds, where they still exist, pay the extra cost when a new injury combines with a pre-existing impairment.

Premium is adjusted by the experience modification: a $48,000 manual premium with a 0.85 mod becomes $40,800.

Federal programs outside state systems

Program	Who it covers	Notes
Longshore and Harbor Workers’ Compensation Act (USL&H)	Longshore workers, ship repairers, shipbuilders and shipbreakers on navigable waters or adjoining piers, wharves, dry docks and terminals	Not vessel masters or crew. Added by NCCI endorsement WC 00 01 06.
Jones Act	Seamen (vessel crew members)	Negligence suit with jury trial against the employer. Maritime Coverage Endorsement WC 00 02 01 provides employers liability.
Federal Employers’ Liability Act (FELA)	Interstate railroad workers	Negligence-based, not no-fault
Federal Employees’ Compensation Act (FECA)	Federal civilian employees, including Postal Service workers	Administered by the Department of Labor; exclusive remedy against the United States
Defense Base Act	Civilian contractor employees working overseas on U.S. military bases or U.S. government public works and defense contracts	Extends Longshore Act benefits. Endorsement WC 00 01 01.
Black Lung Benefits Act	Coal miners totally disabled by pneumoconiosis, and eligible survivors	Paid by responsible coal mine operators or the Black Lung Disability Trust Fund

How a workers comp claim is handled

First report of injury. The employer reports the injury to the insurer, with wage information and witnesses.
Three-point contact. The adjuster promptly reaches the injured worker, the employer and the treating provider for the facts, wage data, diagnosis, causation opinion and work restrictions.
Recorded statement. Open by identifying everyone on the call and getting the worker’s consent on the recording, then ask open-ended questions.
Compensability decision. Watch for red flags such as a Monday morning report of an unwitnessed Friday injury, delayed reporting or a pending layoff. Red flags call for investigation and possibly a special investigations unit referral, not automatic denial.
Medical management and IME. An independent medical examination requested by the insurer gives a second opinion; the IME doctor does not take over treatment.
MMI and impairment. At maximum medical improvement, the condition has plateaued. Temporary benefits generally stop, and an impairment rating (often based on the AMA Guides) drives permanent benefits. Needed medical care can continue.
Return to work. Light duty, TPD for reduced wages, and vocational rehabilitation when the old job is gone.
Subrogation. The insurer asserts its lien against any third-party recovery, unless a waiver of subrogation endorsement gave that right up.

The insurance claim process guide covers documentation and communication habits that apply here too.

Texas: the non-subscriber system

Texas lets private employers choose whether to carry workers compensation. An employer without it is a non-subscriber, and the trade-offs are significant:

It must notify the Division of Workers’ Compensation and its employees, and file DWC Form-005 every year between February 1 and April 30, within 30 days of hiring its first employee, and within 10 days of ending coverage.
If an injured employee sues, the non-subscriber cannot argue contributory negligence, assumption of risk, or a fellow employee’s negligence. It may still defend on intentional self-injury or intoxication, and the employee must prove the employer was negligent. Pre-injury waivers are void.
Employees of covered employers give up common-law claims unless they notify the employer in writing within 5 days of starting work (or of notice of new coverage).

Texas and Florida claim rules at a glance

Topic	Texas	Florida
Must employers carry coverage?	No, private employers may opt out	Yes: private non-construction employers with 4 or more employees; construction employers with 1 or more
Worker’s notice to employer	Within 30 days; claim with the Division within 1 year	Within 30 days
Employer report to carrier	Within 8 days after more than one day of lost time	Within 7 days after actual knowledge
Carrier action	Begin benefits or refuse in writing within 15 days; contest compensability by the 60th day or waive it	Pay the first installment or deny by the 14th day; pay-and-investigate allows 120 days to admit or deny
Waiting period	Income benefits accrue from day 8; paid from day 1 if disability lasts 2 weeks	No compensation for the first 7 days; paid from day 1 if disability exceeds 21 days
Wage-loss rate	Temporary income benefits: 70% of the AWW minus post-injury earnings (75% for the first 26 weeks if the worker earned under $10 an hour); maximum $1,314 a week for injuries October 1, 2026 to September 30, 2027	TTD: 66 2/3% of the AWW
Death benefits	Burial up to $10,000 (or actual reasonable cost if less)	Funeral up to $7,500; dependency compensation capped at $150,000

Before your exam, review the Texas license requirements or Florida license requirements, then take the workers compensation practice test.

Written by the CoveragePrep editorial team. Researched from policy forms, state statutes, regulator websites and exam handbooks, then fact-checked in a separate review. Read our editorial policy or report an error.

Frequently asked questions

Can an injured worker sue the employer instead of taking workers compensation?

Generally no. Exclusive remedy bars a negligence suit against a covered employer, though many states allow a suit for injuries the employer intentionally caused. The worker can still sue a negligent third party, such as another driver, and the insurer can then recover what it paid.

Do Texas adjusters need a separate license to handle workers comp claims?

Texas has a separate adjuster license type for workers compensation, employer's liability and USL&H claims. The all-lines license is issued to adjusters who qualify for both that type and the property, casualty and surety type.

What happens if an employer quietly pays an injured worker in cash?

Under Part Four of the standard policy, the employer must tell the insurer at once about a possibly covered injury and must not make voluntary payments except at its own cost. The cash is not reimbursed, and the late notice can create other problems for the claim.

When does a Texas worker reach maximum medical improvement?

Under the Texas Labor Code, MMI is the earlier of the point when no further material recovery is reasonably expected or 104 weeks after income benefits begin to accrue. Impairment income benefits, three weeks per percentage point of impairment, start the day after MMI.