Is Employers Liability Insurance the Same as Workers’ Compensation?
A frequent question posed by business owners is whether employers liability insurance is the same as workers' compensation. The answer is no; they are distinct coverages. However, since employers liability insurance complements workers’ comp insurance, it is usually included as Part II of a standard workers' comp policy.
Together, these coverages provide a dual layer of protection:
Workers' compensation provides benefits to employees for job-related injuries or illnesses.
Employers liability provides coverage when an employee believes that their injury or illness is due to the employer's negligence and decides to sue for additional compensation.
They are related and can be a bit confusing so let’s take a closer look at each coverage.
What does Workers' Comp cover?
Workers’ comp insurance covers the following:
Medical Expenses: Covers the cost of necessary medical care and treatments
Lost Wages: Pays a percentage of the employee's lost income while they recover
Vocational Training: Supports retraining costs if the employee can't return to their previous job
Rehabilitation: Includes therapies and services to facilitate the employee's return to work
Survivor Benefits: Provides financial assistance to the dependents of an employee who has passed away due to a work-related incident
What does Employers Liability cover?
Employers liability insurance provides coverage for:
Legal Defense: Covers attorney fees, court costs, and other legal expenses related to defending against claims brought by employees
Damages: If an employee wins a lawsuit for negligence, this insurance will cover the compensation awarded, up to the policy limits
Here’s an example:
An employee at a construction site falls due to faulty safety equipment and suffers a severe injury. Workers' compensation steps in and covers the employee's medical expenses and a portion of their lost wages.
However, if the employee believes that the employer's failure to maintain the equipment directly led to the accident, they might decide to file a lawsuit for additional compensation.
In this case, the employer's liability portion of the policy would help cover the legal costs and any settlements.
Additional Protections offered by Employers Liability Insurance
It's also worth noting that employers liability insurance may include coverage for certain claims that are not typically covered by workers' compensation, such as:
Consequential Bodily Injury: If a family member of the injured employee suffers an injury as a consequence of the employee's injury (e.g., a spouse develops a health condition due to the stress of caring for the injured employee), employers liability may cover this.
Dual-Capacity Suits: In rare cases where an employer could be sued in a dual capacity, such as when an employee is injured by a product manufactured by their employer, employers liability insurance may provide coverage.
Loss of Consortium: The spouse of an injured worker might sue for loss of consortium, which refers to the deprivation of the benefits of a family relationship due to the injury.
These additional coverages highlight the importance of having employers liability insurance as part of a comprehensive risk management strategy.
Is Employers Liability always included in a WC Policy?
In certain states known as monopolistic states, workers' compensation insurance is provided exclusively by the state fund, and private insurance carriers are not allowed to sell workers' comp policies. These states are North Dakota, Ohio, Washington, and Wyoming.
Unlike the combined workers' compensation and employers liability policies offered in competitive states, monopolistic state funds typically do not include employers liability coverage. This absence leaves a potential coverage gap for employers who could face liability claims not covered by the state fund.
To address this gap, businesses operating in monopolistic states should consider purchasing a separate employers liability policy, often referred to as "stop gap" coverage.
Comprehensive Coverage with Kickstand
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Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
