Employers’ Liability Coverage
Employers’ liability insurance protects your business if an employee sues over an occupational injury or illness. It covers legal costs in the event an employee alleges your business’ negligence caused their injury or illness. Most workers’ compensation policies automatically include employer’s liability coverage.
Employers’ liability and workers’ compensation
Typically, workers’ compensation policies have two distinct parts.
Part 1: Workers’ compensation coverage
This coverage parts can help pay for medical expenses and portions of lost wages that are the result of an occupational injury or illness.
Part 2: Employers’ liability coverage
This coverage part provides protection for the employer from employee lawsuits regarding work-related injuries or illnesses.
What does employers’ liability cover?
Employers’ liability insurance covers legal defense expenses, including court fees, settlements and judgments, when an employee alleges that your business’ negligence resulted in their work-related injury or illness. Punitive damages, like pain and suffering, are also included.
When an employee receives workers’ compensation benefits, like medical bill and lost wages coverage, they usually must agree not to sue their employers. Unfortunately, this does not mean you are protected from lawsuits. There are several types of legal action that an employee can take, see the below explanation for more information.
Third-party-over action lawsuits occur when an employee sues a third party over their occupational injury or illness and the third-party then sues the employer.
Example: A restaurant employee is burned by a deep-fat fryer. They could file a lawsuit against the fryer manufacturer, who could then file a lawsuit against the restaurant.
Consequential bodily injury lawsuits refer to injuries to a non-employee that are the result, or after-effect, of an employee work-place injury or illness.
Example: Your employee is rendered disabled as the result of a work-related accident. The employee’s spouse can sue your business if they develop health problems from the physical and mental demands of being the employee’s caretaker.
Loss of consortium lawsuits seek punitive damages, like pain and suffering, for the loss of a family member. The family of an employee can file a lawsuit if their relative suffered a serious bodily injury, has a work-related debilitating illness or died in an occupational accident.
Example: An employee of a roofing contractor feel from a tall building while working. They suffered extensive injuries as a result and their family sues the employer for pain and suffering.
Dual-capacity lawsuits can happen when a business has a secondary relationship to an employee.
Example: Your business manufactures a product that causes an employee injury. The employee could sue you as both an employer and as a manufacturer.
How do I obtain employers’ liability insurance?
The majority of workers’ compensation policies automatically include employers’ liability coverage. There are a handful of states, called monopolistic states, where employers’ liability must be purchased separately from a state-run fund. North Dakota, Ohio, Washington and Wyoming are monopolistic states. If your business operates in one of these states, you’ll need to purchase stop gap coverage to gain protection against employee lawsuits.
What is the difference between employers’ liability and employment practices liability?
Employers’ liability insurance covers lawsuits related to employee injuries and illnesses. Employment practices liability covers lawsuits over employment practices, like workplace discrimination and wrongful termination.
How much does employers’ liability coverage cost?
Like workers’ compensation insurance, employers’ liability premiums depend on your industry and your claims history. Insurance carriers will consider payroll, number of employees, type of work being done, location and other factors when calculating your premium. Business with lower salaries, less employees and less danger in their work will often have lower premiums. Likewise, employers’ liability costs for businesses that do not have a claims severity or frequency issue can be lower.