Employers Liability Insurance

The Biggest Misconceptions About What Workers Compensation Covers

Most business owners know the importance of carrying workers compensation insurance to protect themselves from claims for injury or damage by those they employ. However, more and more businesses have realized that workers comp doesn't cover everything. In fact, the exceptions in this widely mandated employee benefit have prompted businesses and insurance companies to develop a companion product called employers liability insurance. In many areas, you can't have workers compensation coverage without employers liability coverage, but in some states and countries, you need to purchase them separately.

What Is Employers Liability Coverage?

You have probably heard of auto gap insurance -- a separate policy to cover the difference between what car insurance covers and what is still owed on the loan for a vehicle. Employers liability insurance is purchased with the same thought in mind: To protect your business from costs resulting from employee claims not covered by workers compensation benefits. It covers the gap between your company's bottom line and lawsuits stemming from employee activities. Some insurance companies and state regulations even refer to employers liability insurance as "stopgap coverage."

Your state, or a foreign country in which you do business, may even require companies to carry employers liability insurance (as does the United Kingdom). It's important to work with an experienced insurance agent who is familiar with your industry, the area in which you do business, and any laws with which you must comply.

You may already have a professional liability policy, an EPLI policy (employment practices liability insurance), a general liability policy and perhaps a host of other coverage options designed to protect your business from any potential risk exposures. Do you really need another liability insurance policy? Yes. Not one of these products fills the gap between workers compensation and your revenues and assets, but employers liability insurance does.

Surprising Claims Covered by Employers Liability Insurance

Another way to say this is, what isn't covered by workers compensation? Unfortunately, many businesses owners are under the misconception that any employee injury on the job is covered by their workers compensation benefits. In reality, there are several exceptions, but theyare covered by employers liability, including:

  • Third party countersuits. Say an employee is injured due to equipment malfunction while operating a forklift. They file for workers compensation and your business is covered, right? What if they also sue the manufacturer of the forklift? The manufacturer's lawyers will most likely bring a cross suit against your company, claiming the malfunction was due to improper maintenance. Workers compensation won't help you fight that case, but employers liability insurance can step in, protecting your business.

  • Loss of consortium. In most cases, an employee who receives benefits from a workers compensation claim can't file a lawsuit against the employer. However, nothing prevents the spouse of the injured employee from filing a claim against your business asserting that they have suffered losses due to the injury. Employers liability insurance can pick up the tab for these types of claims.

  • Dual capacity suits.  These are lawsuits brought by an employee against the employer when the injury stems from a product manufactured by the employer. In such cases, the employer is liable, as both an employer and a manufacturer. Workers compensation can't handle such complicated cases, but employers liability insurance can.

  • Intentional acts. If one of your managers directs an employee to do something that the manager knows is dangerous and could result in an injury, your business can be held liable, and workers compensation will not come to your aid.

Employers liability insurance provides an added layer of protection for your business. Many policies have limits on what they will pay out on these claims. You can choose higher limits and pay slightly higher premium, but rates are usually fairly cheap for an additional $1 million in coverage.

What Is Not Covered by Employers Liability Insurance?

It's important to remember that although EL coverage is designed to be gap insurance to protect you from what workers compensation does not, it also contains exceptions. The main exclusions include:

  • Punitive or exemplary damages because of bodily injury to an employee who is employed in violation of the law.
  • Bodily injury to an employee while employed in violation of the law with the employer’s knowledge.
  • Any obligation imposed by a workers compensation, occupational
    disease, unemployment compensation or disability benefits law, or any
    similar law. These types of losses are covered under the specific
    policies designed for these exposures.
  • Bodily injury intentionally caused or aggravated by the employer.
  • Bodily injury occurring outside the United States, its
    territories, possessions and Canada. Note that this exclusion does not
    apply to bodily injury if a citizen or resident of the United States or Canada is temporarily outside of the country.
  • Damages arising out of wrongful termination, discrimination,
    harassment and other workplace-related torts. Coverage for this exposure is provided under an employment practices liability policy.

You can easily avoid these risks by not breaking the law, carrying workers compensation coverage, and working with an independent insurance agent to ensure that all of your liability policies have adequate limits and appropriate coverage options.

When to Add Employers Liability Coverage

Depending on where you do business, you may be able to purchase EL coverage as part of your workers compensation benefits. The premiums are tied together, so you don't have to worry about making separate payments. In some states, however, you may have to purchase a separate policy, especially if you are conducting business overseas.

If you have workers compensation coverage, you may already have employers liability coverage. The two work together to protect you and your employees. However, you should make sure that:

  • The limits are adequate.
  • Your umbrella or excess policy extends over your employers liability coverage.
  • If you have operations in a monopolistic state fund state (Ohio, North Dakota, West Virginia, Wyoming, Washington, the U.S. Virgin Islands and Puerto Rico), that you have purchased workers compensation in that state and endorsed your primary workers compensation or general liability policy to provide stopgap coverage to protect you from your employers liability exposure in those states.
  • If you have employees traveling abroad or full-time workers abroad,
    you should assess your exposure and consider purchasing
    a foreign voluntary workers compensation policy that includes
    employers liability.

How to Get the Right Employers Liability Coverage

It's imperative to work with a knowledgeable insurance agent who can assist you in identifying your risk exposure gaps and find an employers liability insurance policy with the right limits. Experienced, independent insurance agents with Trusted Choice® are always available to answer any questions you may have and help your business navigate your options. These agents can find you a number of quotes from a variety of insurance companies, allowing you to choose the best coverage at the most competitive rates. Contact a Trusted Choice agent today to find out how you can obtain the added protection of an employers liability insurance policy.

Now, who's ready to get their insurance problems solved?