What Is Employer's Liability Insurance?
Employer’s liability insurance protects employers from claims that their negligence resulted in a workplace injury. For example, a worker could trip in a dimly lit stairwell and blame the resulting injury on the employer for not providing adequate lighting. Workers’ compensation may cover the majority of the fees, such as medical expenses. However, employees can file a lawsuit for additional damages if they can prove the employer’s negligence caused the injury. Employer’s liability insurance protects against these instances when the employer is held at fault.
Employer's liability insurance could help pay for:
- Attorney's fees.
- Court costs.
- Settlements or judgements.
Basically, employer's liability insurance will help your company survive a lawsuit grounded in a claim of negligence.
What types of claims does it cover?
An employer’s liability lawsuit typically involves one or more of the following claims:
- Third-party-over 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. Basically, it’s a lawsuit alleging damage to the marital unit.
- 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 bodily 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 insurance 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.
There’s an easy way to tell if your workers’ compensation policy might be lacking employer’s liability insurance. Employers in the following states purchase workers’ compensation from a mandatory state-run fund which does not include employer’s liability coverage:
- North Dakota.
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.
Stop gap coverage
If your workers’ compensation policy does not include employer’s liability insurance, stop gap coverage can fill the gap in coverage. Stop gap 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 general liability insurance.