Employer's Liability Insurance

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Employer’s liability insurance in workers’ compensation

If an employee files a negligence lawsuit related to a work-related injury or illness, employer’s liability insurance can pay for your legal expenses.

What is employer’s liability insurance?

When an employee experiences a work-related injury or illness, workers’ compensation insurance will typically pay for the employee’s medical bills and partial lost wages. However, employees still have the option to file a lawsuit for additional damages if they believe the employer’s negligence caused the issue. If the employee sues, your employer’s liability coverage can pay for legal expenses, such as:

  • Attorney’s fees
  • Court costs
  • Settlements or judgments

Basically, employer’s liability insurance will help your company survive a negligence lawsuit stemming from an employee injury.

What types of claims does employer’s liability insurance cover?

Third-party action

Although employees receiving workers’ comp for a workplace injury cannot sue their employer directly, they can still sue a third party. For example, an employee injured by a piece of machinery at your workplace could sue the equipment’s manufacturer. Then, the manufacturer could file a lawsuit against you – that would be a third-party-over action lawsuit.

Loss of consortium

This type of lawsuit is filed by the spouse of an employee injured at your workplace. The spouse can sue you for injuries that result in the loss of a family relationship, such as when an employee was severely injured or killed at your workplace.

Dual-capacity suit

A dual-capacity lawsuit means that the employer and the employee have more than one relationship. For example, an employee who was injured by a product that your company manufactured could hold you liable as both an employer and as a manufacturer.

Consequential body injury

This lawsuit refers to consequential damage – such as when a spouse suffers injuries that occurred because of the initial employee injury. For instance, the stress from a workplace injury could cause a spouse to suffer elevated blood pressure, which could cause a stroke or other bodily injury.

How do I get employer’s liability insurance?

Employer’s liability coverage is typically included as the second part of a workers’ compensation policy. While the first part of workers’ comp protects the employee by helping with medical fees and lost wages, the second part protects the employer from liability. Without employer’s liability insurance, a business owner could end up paying significant funds out of pocket if an employee decides to sue.

Employers in the following states purchase workers’ compensation from a mandatory state-run fund which does not include employer’s liability coverage:

  • North Dakota
  • Ohio
  • Washington
  • Wyoming

In addition to these states, Puerto Rico and the U.S. Virgin Islands also have monopolistic workers’ compensation funds, meaning employers must purchase workers’ comp through the state, or prove they are eligible to self-insure.

Stopgap coverage

If your workers’ compensation policy does not include employer’s liability insurance, stop gap coverage can fill the gap in coverage. Stopgap coverage is an endorsement – or an add-on – to another policy. You can purchase it from a private insurer, typically as an addition to your workers’ compensation insurance.

Check with an Insureon agent to see if your workers’ compensation policy includes the protection you need. If you do need to purchase employer’s liability insurance, ask your agent for details, as you can tailor this coverage to match the needs of your business. With Insureon, you can get free quotes in 15 minutes from multiple top-rated carriers.

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Workers' compensation insurance: Further reading

Workers' Compensation in the Insureon Blog