Stop Gap Coverage
Written by Justin Goodman, CIC, CISC, CLCS, CEO and Co-Founder, Total CSR
Published: October 7, 2026 · Last reviewed: October 7, 2026
In plain language: Stop Gap Coverage protects an employer when a worker sues the company directly for an on-the-job injury, instead of just filing a workers' comp claim. States like Ohio, North Dakota, Washington, and Wyoming run their own workers' comp funds and do not include this lawsuit protection automatically, leaving a gap.
Technical definition: Stop Gap Coverage is an endorsement or standalone policy providing employers liability coverage in monopolistic workers' compensation states, where the state fund excludes Part Two Employers Liability. It typically attaches to a general liability policy via endorsement or sits within an inspected monopolistic policy's optional coverage.
Stop Gap Coverage at a Glance
| Attribute | Detail |
|---|---|
| Also known as | Stop Gap Liability, Employers Liability Stop Gap Endorsement |
| Category | Liability coverage gap-filler |
| Lines of business | Workers' Compensation, Commercial General Liability, Employers Liability |
| Industries most affected | Construction, manufacturing, staffing, healthcare, retail |
| Related forms or endorsements | CG 04 24 (Stop Gap endorsement to CGL), state-specific monopolistic fund employers liability options |
| Who bears the risk | Employer, absent the endorsement; insurer, once coverage is bound |
| Common solution | Stop Gap endorsement added to CGL policy or purchased through the monopolistic state fund |
| Also interacts with | Exclusive remedy doctrine, employer's liability exclusion on CGL, umbrella/excess liability |
Key Takeaways
- Stop Gap Coverage fills the employers liability gap that monopolistic state workers' comp funds leave open, protecting employers from direct injury lawsuits by employees.
- Agencies writing business in Ohio, North Dakota, Washington, or Wyoming must confirm Stop Gap is in place, because a missing endorsement leaves the client with zero employers liability protection.
- The most common misunderstanding is assuming the standard CGL policy's employer's liability exclusion does not apply in monopolistic states; it still applies unless Stop Gap is specifically added.
- Agencies should add a Stop Gap checklist item to every new-business and renewal review for operations with any presence in a monopolistic state.
What Is Stop Gap Coverage in Insurance?
Stop Gap Coverage is a liability protection designed to close a hole created by state-run workers' compensation systems. Four states — Ohio, North Dakota, Washington, and Wyoming — require employers to buy workers' comp exclusively through a state fund rather than private carriers. Those state funds pay medical bills and lost wages under the workers' comp system, but they do not include employers liability insurance, the coverage that responds when an injured employee sues the employer directly for negligence rather than filing a comp claim.
Every standard commercial general liability policy contains an employer's liability exclusion, since that exposure is supposed to be handled by the workers' comp policy's Part Two coverage. In competitive states, that assumption holds because private carriers bundle Part One and Part Two together. In monopolistic states, Part Two does not exist within the state fund, so the CGL exclusion leaves a true gap with no coverage anywhere.
Consider a manufacturing company in Ohio where an employee loses a finger in a press machine. The employee collects workers' comp benefits through the Ohio Bureau of Workers' Compensation, but also sues the company alleging it removed a safety guard, a theory some states allow outside the exclusive remedy doctrine. Without Stop Gap Coverage, the employer faces that lawsuit with no insurance response at all. With Stop Gap endorsed onto the CGL policy, the insurer defends and indemnifies the employer liability claim.
How Does Stop Gap Coverage Work?
- The injury. An employee suffers a workplace injury in a monopolistic state and the state fund begins paying medical and wage-loss benefits under workers' comp.
- The lawsuit. The employee, or the employee's attorney, files a separate civil suit against the employer alleging negligence, often citing an exception to exclusive remedy such as intentional tort or safety-device removal.
- The coverage check. The agency or carrier reviews the CGL policy and finds the standard employer's liability exclusion, then checks for a Stop Gap endorsement or state-fund option.
- The response. If Stop Gap Coverage is in force, the insurer accepts the claim, assigns defense counsel, and indemnifies covered damages up to policy limits.
- The gap exposure. If Stop Gap Coverage was never purchased, the employer defends the suit out of pocket with no insurance support, often the trigger for an E&O claim against the agency.
Real Claim Examples Involving Stop Gap Coverage
Press machine injury at an Ohio manufacturer
A machine operator at an Ohio metal stamping plant lost two fingers after a safety guard had been removed for faster production. The employee collected workers' comp benefits, then sued the company alleging the guard removal was an intentional disregard for safety. Because the employer's CGL policy carried the CG 04 24 Stop Gap endorsement, the carrier defended the suit and ultimately settled the liability claim within policy limits.
Washington state contractor sued after scaffolding collapse
A framing subcontractor in Washington State had an employee injured when scaffolding collapsed. The employee's family filed a wrongful-death-adjacent negligence suit against the contractor directly, separate from the state fund claim. The contractor had never added Stop Gap Coverage because the producer assumed the CGL policy's standard liability limits applied; the claim was declined under the employer's liability exclusion, and the contractor faced the suit uninsured.
Staffing agency placement injury in North Dakota
A staffing firm placed a temporary worker at a client's warehouse in North Dakota, and the worker was injured operating a forklift without proper training. The worker sued both the staffing firm and the host employer. The staffing firm's Stop Gap endorsement responded to its portion of the claim, while the host employer, lacking its own Stop Gap Coverage, had to retain private defense counsel.
Stop Gap Coverage vs. Employers Liability Insurance: What Is the Difference?
Stop Gap Coverage and standard employers liability insurance both protect employers from direct employee lawsuits, but they apply in different state systems. Employers liability insurance is Part Two of a standard workers' comp policy in competitive states, bundled automatically with Part One; Stop Gap Coverage is a separate purchase required specifically because monopolistic states do not offer that bundle.
| Comparison area | Stop Gap Coverage | Employers Liability Insurance |
|---|---|---|
| Primary use case | Monopolistic states (OH, ND, WA, WY) | Competitive workers' comp states |
| Coverage / concept type | Standalone endorsement or policy add-on | Part Two of standard WC policy |
| Typical exclusions | Intentional acts, punitive damages in some states | Intentional acts, punitive damages in some states |
| Who is most affected by errors | Employers operating solely in monopolistic states | Employers assuming Part Two exists where it does not |
| Common mistakes | Treating CGL as sufficient without the endorsement | Confusing it with general liability coverage |
What Are the Most Common Mistakes With Stop Gap Coverage?
- Assuming the CGL policy already covers employee injury lawsuits, when the standard employer's liability exclusion actually blocks that claim entirely without Stop Gap attached.
- Forgetting to add Stop Gap when a client expands operations into Ohio, North Dakota, Washington, or Wyoming for the first time, often during a multi-state growth phase.
- Writing Stop Gap limits that do not match the employer's other liability limits, creating a confusing limits structure that an umbrella policy may not follow properly.
- Failing to document that Stop Gap was offered and declined, which becomes a central E&O exposure if an uninsured employers liability suit later arises.
- Overlooking Stop Gap needs for staffing agencies and leasing companies, where both the staffing firm and the host employer may need separate coverage.
How to Explain Stop Gap Coverage to a Client
Explaining Stop Gap Coverage to a personal lines client
Personal lines clients rarely need this explanation directly, but a client who also owns a small business in Ohio or Washington may ask. A CSR can say: "If you have employees and operate in a state with its own workers' comp fund, that fund doesn't cover lawsuits your employee might file against you directly. Stop Gap Coverage adds that protection."
Explaining Stop Gap Coverage to a small business owner
Tell the business owner: "Your state's workers' comp fund pays medical bills and lost wages if an employee gets hurt, but it won't defend you if that same employee sues you personally for negligence. Stop Gap Coverage is the piece that steps in for that lawsuit, and without it, you're paying a defense lawyer out of your own pocket."
Explaining Stop Gap Coverage to a CFO or risk manager
Frame it as a balance sheet issue: "Your monopolistic state workers' comp fund excludes employers liability entirely, so any employee negligence suit outside exclusive remedy falls on your general liability policy, which also excludes it by default. Stop Gap closes that specific gap, and we recommend matching its limits to your primary CGL and umbrella structure so there's no coverage seam."
Frequently Asked Questions About Stop Gap Coverage
What states require Stop Gap Coverage?
Ohio, North Dakota, Washington, and Wyoming operate monopolistic workers' comp funds and are the states where Stop Gap Coverage is typically needed. Employers with any operations, payroll, or employees physically working in these four states should carry Stop Gap regardless of where the company is headquartered.
Does Stop Gap Coverage replace workers' compensation insurance?
Stop Gap Coverage does not replace workers' compensation insurance. The state fund still pays medical bills and wage-loss benefits under workers' comp; Stop Gap only responds to separate employers liability lawsuits that fall outside the exclusive remedy doctrine.
How is Stop Gap Coverage typically purchased?
Stop Gap Coverage is most often added as an endorsement to the commercial general liability policy, commonly through a form like CG 04 24, though some monopolistic state funds also offer it as a direct optional coverage. Agencies should confirm with the specific carrier whether it attaches to CGL or must be purchased through the state fund itself.
What happens if an employer never buys Stop Gap Coverage?
An employer without Stop Gap Coverage has no insurance response if an employee sues directly for a workplace injury in a monopolistic state. The employer must fund defense costs and any settlement or judgment entirely out of pocket, which can be financially severe for a small or mid-sized business.
Can a company with employees in multiple states need Stop Gap only for some locations?
Yes, Stop Gap Coverage only applies to employees working in monopolistic states, so a multi-state employer may need it for its Ohio location while relying on standard employers liability Part Two coverage everywhere else. Agencies writing multi-state risks should review payroll by state to confirm Stop Gap is scoped correctly.
Is Stop Gap Coverage the same thing as excess or umbrella liability?
Stop Gap Coverage is not the same as excess or umbrella liability, though umbrella policies often sit above it. Stop Gap provides the underlying primary employers liability response in a monopolistic state, and an umbrella policy can be scheduled to follow form over it for higher limits.
Related Insurance Terms
- Employers Liability Insurance: Coverage under Part Two of a standard workers' comp policy that responds to employee lawsuits alleging employer negligence, the exact protection Stop Gap Coverage replicates in monopolistic states.
- Monopolistic State Fund: A state-run workers' compensation system that employers must use exclusively, with no private carrier option, creating the structural gap Stop Gap Coverage is designed to fill.
- Exclusive Remedy Doctrine: The legal principle that workers' comp benefits are an injured employee's only recourse against an employer, with narrow exceptions like intentional torts that trigger the need for employers liability or Stop Gap coverage.
- Employer's Liability Exclusion: A standard CGL policy exclusion barring coverage for employee bodily injury claims, the exclusion Stop Gap Coverage is specifically endorsed to override.
- Workers' Compensation Insurance: The statutory coverage paying medical and wage-loss benefits for workplace injuries, distinct from and complementary to the liability protection Stop Gap Coverage provides.
Sources and References
- Ohio Bureau of Workers' Compensation. Employer Liability Coverage.
About the Author
Justin Goodman, CIC, CCIP, CISC, CLCS, CRIS, PCIA, QCLS, MFHR CEO and Co-Founder, Total CSR, Inc.
Justin Goodman is a third-generation insurance broker with over two decades in agency operations. He has trained more than 100,000 CSRs, account managers, and producers in commercial and personal lines coverage, from workers' compensation to construction risk. He was named 2024 Insurance Journal Agent of the Year and one of the nation's top five construction insurance experts by Risk & Insurance. He is the author of Retain, which applies cognitive science research on memory and knowledge transfer to insurance training, and speaks nationally on how agencies build durable technical expertise in their teams.