Employers Liability Insurance

Most business owners know how important workers' compensation insurance is in protecting themselves from employee injury or illness claims. Unfortunately, workers' comp doesn't cover everything. In fact, the exceptions have prompted businesses and insurance companies to develop a companion product called employers liability insurance. 

A local independent insurance agent can help your business supplement the coverage it needs by finding the right employers liability insurance. They'll help ensure your company is fully protected against employee injury or illness claims. First, though, here's a breakdown of employers liability coverage, what it covers, and why it's necessary.

What Is Employers Liability Insurance?

You’ve probably heard of auto gap insurance, which is a separate policy to cover the difference between what car insurance covers and what's still owed on the loan for a vehicle in case of a total loss. Employers liability insurance is purchased with essentially the same thought in mind, which is to protect your business from costs resulting from employee claims that aren't covered by workers' compensation benefits. Some insurance companies and state regulations refer to employers liability insurance as "stopgap coverage."

Employers liability insurance is often purchased with workers' comp., though sometimes the two coverages are sold separately. This coverage helps businesses pay for the cost of lawsuits related to employee claims of injury or illness resulting from their job duties or the work environment. 

Typically, an employee wouldn't need to sue a business after receiving worker's comp. benefits, but if they feel their benefits received were inadequate, they could decide to press charges against you for additional compensation. Without employers liability insurance, just one employee lawsuit could cause major financial harm to a business.

Is Employers Liability Insurance the Same as Workers' Compensation Insurance?

Though employers liability insurance tends to go together with workers' comp., they're not the same policy. You can understand the difference in coverages by considering the following:

• Workers' compensation: Pays for employee medical bills and partial wage replacement if they get injured or ill due to their job or job site.
• Employers liability insurance: Pays for legal expenses if an employee sues the business for a work-related injury or illness.

Having both of these coverages together is a comprehensive way to protect your business against potentially costly incidents of employee injuries or illness. This is especially critical if your business is in a high-risk industry like construction or manufacturing, where the possibility of employee injuries or illness is much greater.

Is Employers Liability Insurance Required?

Your business might be required to have employers liability insurance depending on its location. Most states require businesses with at least one employee to carry workers' compensation, with a few exceptions. Employers liability insurance might also be required in your state, so be sure to review your local business insurance requirements. 

What Does Employers Liability Insurance Cover?

Unfortunately, many business owners are under the misconception that their workers' compensation benefits cover any employee injury on the job. In reality, several exceptions aren’t covered. However, several types of incidents and claims are covered by employers liability insurance, such as:

• Third-party countersuits: Say an employee is injured due to equipment malfunction while operating a forklift and decides to 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.
• 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 they 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 an employer with whom they share a second relationship, such as both an employer and a manufacturer. Workers' compensation can't handle such complicated cases, but employers liability insurance can.
• Consequential bodily injury: In the event a non-employee suffers harm due to an employee's injury or illness, they can sue your business. This can apply in the case of an employee's spouse who gets sick while caring for an injured or ill worker from your business. Workers' comp. couldn't handle this type of claim, but employers liability could.

Many employers liability policies have limits on how much they will pay out for these claims. You can choose higher limits and pay slightly higher premiums, but rates are usually fairly cheap for an additional $1 million in coverage, which can be provided by a commercial umbrella policy. You can buy umbrella coverage in increments of $1 million in excess liability insurance to increase your business's protection against expensive lawsuits.

What's Not Covered by Employers Liability Insurance?

As comprehensive as employers liability coverage is, it doesn’t cover everything. It also comes with exceptions and typically won't cover any of the following:

*To protect your business against employee claims of wrongful termination, sexual harassment, or discrimination, consider adding an employment practices liability insurance policy.

How Much Does Employers Liability Insurance Cost?

The cost of employers liability insurance can vary considerably depending on the type of business you run and other factors. These can include the following:

• Business industry
• Business size and location
• Business operations and exposures
• Number of employees
• Annual revenue
• Prior claims history

An independent insurance agent can help you find the most affordable employers liability insurance near you.

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Here's How an Independent Insurance Agent Can Help

Independent insurance agents have access to multiple insurance companies, so they're free to shop and compare employers liability insurance quotes and policy options for you. Ultimately, they'll present you with only the results that offer the best blend of coverage and cost. And down the road, your agent can help you file business insurance claims or update your coverage as necessary.

FAQs about Employers Liability Insurance