Employers Liability – Coverage Beyond Workers Compensation
In plain language: Employers liability insurance provides financial protection for business owners if their employees sue them for work-related injuries or illnesses that aren’t covered by workers compensation insurance. This is like an extra layer of protection for unexpected costs that can arise in the workplace.
Technical definition: Employers liability insurance, often part of a standard workers compensation policy, covers claims arising from work-related injuries or occupational diseases that aren’t covered by workers compensation. It typically comes into effect in scenarios involving dual capacity suits, third-party-over claims, consequential bodily injury, and claims for punitive damages. Most commonly linked with the workers compensation and employers liability policy form, it fills in gaps that exist in state-mandated workers compensation coverages.
When unsafe working conditions lead to injuries beyond what the workers’ compensation insurance covers, employers liability can be a business-saving safety net.
TL;DR
- Employers liability insurance is a safety net for businesses when a worker’s compensation claim is insufficient or unavailable.
- It matters in day-to-day agency work because it protects employers from financial ruin due to large injury claims.
- A common pitfall is underestimating its importance and not carrying sufficient coverage.
- A quick win is fully understanding the coverage and appropriately explaining it to business clients.
What Is Employers Liability in Insurance?
Employers liability coverage extends beyond workers compensation insurance, catering to work-related injuries that aren’t catered to by the latter. It’s a crucial aspect of a comprehensive business insurance package and commonly appears as part of a workers compensation policy.
While workers compensation pays for state-mandated benefits like lost wages, medical expenses, and rehabilitation costs for injured employees, employers liability offers protection against additional exposures. These include loss-of-consortium claims or legal liability claims that aren’t covered by workers compensation.
Employers liability coverage also aids in handling out-of-court settlements, which aren’t typically covered under workers’ compensation. This coverage becomes crucial in cases where the employer might be found negligent in providing a safe working environment, leading to work-related injuries.
Key Related Terms to Know
- EPLI – Employment Practices Liability Insurance – Coverage protecting employers from employee claims such as wrongful termination, discrimination, and harassment.
- Dual Capacity Suits – Lawsuits where an employee can sue their employer as both an employer and a manufacturer if injured using the employer’s product.
- Consequential Body Injury – An injury suffered by a worker’s family member as a result of the employee’s on-the-job injury.
- Third-Party-Over Claims – Claims resulting from a lawsuit by a third party against the employer as a result of a work-related injury to an employee.
Common Questions About Employers Liability
What does employers liability insurance cover?
Employers liability insurance covers costs not protected by workers compensation insurance. These may include legal fees and court costs if an employee sues for damages caused by injury or illness resulting from their employment. Examples include consequential bodily injury and loss-of-consortium claims.
How much does employers liability insurance cost?
The cost varies depending on numerous factors like the nature of your business, your previous claim history, and your location. An improved experience modification factor could lead to lower costs.
What is the difference between workers compensation and employers liability?
Both coverages are typically part of the same policy. Workers compensation covers employees’ medical treatment and compensation for wage loss due to work-related injuries. Employers liability provides additional coverage for things like legal fees and settlement costs if an employee decides to sue.
Employers Liability vs. Workers Compensation
Scenario 1: An employee suffered severe chemical burns due to the improper handling of a chemical at work. He sued the employer for civil negligence claim, stating he hadn’t received adequate safety training. The employers liability coverage provided legal defense and settlement costs.
Scenario 2: A construction company faced a dual-capacity suit when a worker injured himself using a faulty drill manufactured by the same employer. The worker’s compensation hadn’t covered the claim due to the employer’s assumed negligence. The employers liability policy covered the costs of this lawsuit.
Scenario 3: A family sued a company for loss of consortium after a fatal workplace accident. Their lawsuit was directed toward the financial and emotional losses suffered due to their loved one’s sudden death. Here, employers liability insurance buffered the financial impact of the lawsuit.
Limitations and Common Mistakes
Employers liability coverage doesn’t guard against:
- Injuries sustained outside of the workplace or outside working hours
- Claims arising from non-employment-related activities
- Punitive damages for employers’ gross negligence in some states
Common misunderstandings and errors causing E&O exposure:
- Believing workers compensation provides complete protection against all employee injury claims
- Not having sufficient employers liability coverage limits
- Misinterpreting what na employer liability policy covers
How to Explain Employers Liability to Clients
Personal Lines client Think of employers liability insurance as a backup for your workers compensation insurance. It covers any extra costs if your worker gets hurt on the job and the workers compensation doesn’t cover everything.
Small Business owner
Having employers liability insurance is like an umbrella that provides coverage when your workers compensation can’t keep up. It can cover you for things like legal fees and court costs if an employee sues.
CFO or Risk Manager Part of managing risks means having coverage at all possible points. Employers liability insurance does just that, covering you against lawsuits from employees injured on the job that aren’t fully covered by workers compensation.