If your business has employees, then the short answer is: yes, you can benefit from Employer’s Liability Insurance. It can help you survive employee lawsuits that aren’t covered by any other type of policy. And chances are, if you have Workers’ Compensation Insurance, then you already have Employer’s Liability coverage.
But don’t exit your browser just yet. Not everyone has Employer’s Liability coverage, even if they have Workers’ Comp.
Confused? It’s okay, we’ll explain.
Workers’ Compensation and Employer’s Liability: Two Parts Make a Whole
There are generally two parts to Workers’ Compensation Insurance. The first part kicks in when a worker is injured or made ill while at work. This part is designed to cover…
- Medical bills.
- Partial lost wages.
- Ongoing care (rehabilitation).
- Funeral expenses and death benefits if the employee is killed on the job.
The other part (which, again, is typically – but not always – included) is what’s known as Employer’s Liability Insurance. This covers…
- Employee lawsuits over injuries.
- Costs of these lawsuits, including attorney fees, court costs, settlements and judgments.
(Note: this policy is very different from what Employment Practices Liability Insurance is meant for. An EPLI policy can cover lawsuits over discrimination and harassment in the workplace, not lawsuits over work injuries.)
So why would an employee sue his or her employer if they already get Workers’ Comp coverage? And why isn’t this coverage always included?
Coverage When You’re Sued over a Work Injury
You might be aware that Workers’ Comp is intended to be an exclusive remedy for injured employees. What this normally means is that the worker foregoes his right to sue the employer if he’s covered for his injury by Workers’ Compensation Insurance, and, for most run-of-the-mill accidents, this is a sufficient resolution.
Sometimes the circumstances around an injury mean that the worker isn’t covered by this insurance, or the worker is allowed additional legal action against the employer. This might happen if…
- The worker alleges the injury was caused by the employer’s negligence.
- The worker alleges the injury was caused by an intentional act.
- The injury or illness isn’t covered under Workers’ Comp state statutes.
- The employer is held in dual capacity (e.g., if a company’s product injuries an employee, that company could be sued by the employee for product liability in addition to receiving Workers’ Comp benefits).
In these situations, the cost of a lawsuit can easily outgrow the cost of the initial Workers’ Comp claim. Employer’s Liability coverage can provide funds to help pay for a business’s legal defense as well as the resulting outcome, whether it’s a settlement or court judgment.
In other words, it’s coverage specifically for you following a work accident, not your employees.
You Might Not Have This Insurance through a State-Run Workers’ Comp Fund
Ohio, North Dakota, Washington, and Wyoming all run monopolistic Workers’ Comp funds – meaning you have to buy into the state-run program if you have employees. Employer’s Liability coverage, however, is not included in these programs. In these states, a business with the state coverage is only covered for on-the-job work injuries and illnesses.
If you’re located in one of these states, you have to purchase Employer’s Liability Insurance separately if you want it. Sometimes called a stop gap endorsement, this coverage can be purchased from private carriers and is typically included as part of a business’s General Liability Insurance.
If you’re not in one of these states, make sure a Workers’ Comp policy includes Employer’s Liability before you purchase it. Ask your insurance agent if you have any questions.
For more on general ways to protect your business and avoid work injury claims, check out “5 Tips for Minimizing Workers’ Comp Costs for IT Businesses.”