In the most basic terms, Employer’s Liability Insurance is designed to address an employer’s liability following a work injury, outside of what Workers’ Compensation Insurance covers.
In most situations, Workers’ Comp is an adequate solution for a work injury. If the injured employee receives compensation for his or her medical expenses, the employer has no further responsibility. However, in some situations, the employee (or a spouse) can sue the employer for additional damages – and this is where Employer’s Liability Insurance, sometimes called employer’s work comp, comes in.
Employer’s Liability Insurance helps to pay for the legal costs associated with defending against these types of Workers’ Comp lawsuits and can help pay for settlements or judgments that arise. Let’s go over the difference between this and standard Workers’ Comp and what kinds of situations might lead to a lawsuit.
The Difference between Employer’s Liability Insurance and Workers’ Compensation
Employer’s Liability Insurance is sometimes referred to as the second part of Workers’ Compensation Insurance because both types of coverage are typically included in a Workers’ Comp policy.
The first part – which most people are familiar with – kicks in when a worker is injured or made ill while on the job. (See our “Overview of Workers’ Compensation Insurance for Technology Businesses” for more information.) This part is designed to cover the following costs for an injured worker:
- Medical bills.
- Partial lost wages.
- Ongoing care (rehabilitation).
- Funeral expenses and death benefits if the employee suffers a fatal injury.
In almost every state, employers are required by law to carry this first part of Workers’ Compensation Insurance. Employer’s Liability Insurance, on the other hand, usually isn’t legally required, but it’s included in most policies anyway.
The exception is in states where businesses have to take part in a state-run Workers’ Comp program. These states are…
- North Dakota.
Because Employer’s Liability Insurance isn’t included in these programs, businesses looking for this protection have to purchase it separately in what’s called “Stop-Gap coverage.”
Workers’ Compensation Lawsuits & Employer’s Liability Insurance
If an injured worker receives benefits from a Workers’ Comp claim, they’re usually prohibited from suing their employer for additional compensation.
But that’s not always the case.
An employer may be sued for a work injury for the following reasons or situations:
- Negligence. The injured worker alleges the injury was directly caused by the employer’s negligence.
- Intentional acts. The worker alleges the injury was caused by an intentional act.
- Injury not covered by statute. The injury or illness isn’t covered under Workers’ Comp state statutes.
- Dual-capacity suit. The employer is held in dual capacity. For example, if a company’s product injuries an employee, that company could be sued by the employee for product liability in addition to receiving the regular Workers’ Comp benefits.
- Third party over actions. Another party that was held liable for your employee’s injury files this kind of lawsuit against your business. For example, one of your employees was injured using a piece of machinery that you had not properly maintained. The employee sues the manufacturer of the equipment, and the manufacturer turns around and sues you for contributory negligence.
- Loss of consortium. An injured employee’s spouse may file this type of lawsuit, citing their loss of economic benefit or marital relations caused by the employee’s injury.
- Consequential bodily injury. If your employee’s family members suffer bodily injuries as a consequence of the employee’s injury, they could sue your business.
If your business experiences these types of claims, Employer’s Liability Insurance can help cover your associated…
- Attorney fees.
- Court costs.
- Settlements and judgments.
With this coverage, your business is prepared if a worker decides to sue over an injury. But take note, this coverage is very different from that provided by Employment Practices Liability Insurance, which covers lawsuits over harassment, for example.