Workers Comp & Employers Liability
Workers compensation and employers liability insurance make up the two components of the same coverage in most states and are typically contained within one policy (commonly referred to as workers compensation).
Workers compensation is one component of the policy and it covers the medical and indemnity costs associated with a claim. There is no limit to the dollar amount of coverage provided for this portion. Coverage under workers comp includes:
- Medical costs for the claim
- Lost wages for the employee
- Disability payments for injuries
- Death Benefits
Separate from the workers compensation component, employers liability provides protection for the business against lawsuits involving employees who are injured or suffer an occupational illness. These lawsuits typically come from the employee, family relatives, and even other 3rd parties. They are typically based on negligence. Employers liability does not replace Employment Practices Liability Insurance as it won't cover claims such as discrimination or harassment.
Think of employers liability coverage as similar to your general liability coverage. While general liability covers a business from 3rd party claims such as customer injuries or negligence, it does not provide coverage for employee-related negligence. Employers liability fills the gap by responding to employee claims.
What Employers Liability Covers?
If an employee files a suit against a covered business, employers liability can cover the following costs up to the limits of coverage:
- Legal defense costs
- Judgments and damages awarded
- Settlement offers
- Court-related expenses
When Would I Need Employers Liability Coverage?
Workers compensation and employers liability will typically respond to an employee-related claim unless the policy specifically excludes coverage for the event type. Here are the most common causes of employers liability lawsuits:
- Loss of Consortium
- This type of lawsuit is generally filed by a spouse and is based on the claim that the injured employee is no longer able to engage in marital relations due to the injury. Permanent nerve damage could be cited as the cause, for example.
- Third Party Over Actions
- Third party over action claims happen when a 3rd party sues your business for contributory negligence after your employee files a lawsuit against them. manufacturers and contractors provide good examples of this type of suit. Imagine and employee injured while using a machine or equipment for a job and sustains an injury. while collecting workers compensation benefits, they file a lawsuit against the manufacturer of the equipment. The manufacturer, in turn, sues your business for contributory negligence for not maintaining the equipment properly.
- Consequential Injuries
- These type of claims typically come from family members and spouses who claim bodily/psychological injuries as a consequence of the employee's injury. An example of a consequential injury would be a spouse who suffers a stroke while the employee was in the hospital.
- Injured Workers Rejects Workers Compensation
- Some states allow injured employees to reject coverage and file suit for damages due to negligence.
- Dual Capacity Claims
- These claims are specific to manufactures and generally happen when the employer is also the manufacturer of the product that caused the employee injury.
Employer liability insurance does contain certain policy exclusions and will not provide coverage for some types of employee claims. Some of these policy exclusions include:
- Intentional injuries
- Psychological injuries
- Claims caused by injuries outside of the United States or Canada
- Injuries to workers who are illegally employed
- Individuals covered under federal laws
Employers Liability Coverage
Employers Liability Limits
Employers liability limits are set within the policy and employers have the ability to increase these limits of coverage. Each state sets the minimum required limits for coverage in their state. Basic statutory limits in most states are:
- $100,000 per occurrence for bodily injuries
- $100,000 per employee for bodily injury be occupational disease
- $500,000 policy limit for bodily injuries by disease
Most private workers insurance companies offer easy options to increase these limits of coverage with options such as $500k/$500k/$500k or $1mil/$1mil/$1mil. Increasing employers liability limits typically costs business owners an additional 2%-3% of premium. Limits can often be increase to a maximum of $5 million for each part of coverage. An Umbrella policy may also provide additional coverage over employers liability insurance.
Workers' Comp Includes Employers Liability Coverage
* Employers Liability coverage not included in all monopolistic states.
* All NCCI and other states' coverage includes Employers Liability Insurance.