What is Employer's Liability Insurance?

Posted on: Thursday, October 10, 2013

Chances are, if you own a small business, you have purchased Workers’ Compensation Insurance, which is tied to another policy - something called Employer’s Liability Insurance. It is equally likely that you have a pretty clear idea of what one of these policies covers, but not the second.

Workers’ Compensation Insurance protects your employees if they happen to become injured on the job. It provides wage replacement and medical benefits to your employee in lieu of a lawsuit from the injured party. This is commonly known as the compensatory bargain, and it offers unlimited medical benefits and loss of wages for an injured worker covered under the policy.  

Employer’s Liability Insurance is intended to protect an employer from legal liability arising out of employee injury, which is not covered by the workers compensation policy. Simply put, if an injured employee is not satisfied alone with medical and loss of wage benefits because they feel their employer purposefully put them in harm’s way on the job, or they feel that they suffered injury because the employer was grossly negligent, they may sue for punitive damages.

Consider, for example, an employee who was injured driving a vehicle which the employer had not properly maintained. In addition to the benefits received under the workers compensation program, the employee also sues the manufacturer of the vehicle. In turn, the vehicle manufacturer sues the employer for contributory negligence due to poor maintenance. However fair or unfair such incidents may be, they are not unheard of. This is commonly the type of situation that Employer’s Liability Insurance was designed for.

Significantly, Employers’ Liability coverage is limited, unlike the medical benefits or loss of wages compensation of Workers’ Compensation.  A workers’ compensation policy will pay out whatever it takes to rehabilitate an injured employee. Employers who were charged with gross negligence or knowingly placing their employees in harm’s way have built-in compensatory ceilings.  Generally, Employers’ Liability coverage limits start at $100,000 each employee, $100,000 each accident. Incremental raises above those limits are usually available, and many businesses opt for increased limits for peace of mind, or because work contracts often require higher limits. 

Employer’s Liability Insurance policies commonly cover three other legal situations worth noting here.

  1. Loss of Consortium - Typically filed by an injured employee’s spouse
  2. Dual Capacity - Brought by an injured employee when the injury is caused by a product the employer manufacturers. In such a case, the employer is liable not only as an employer but also as a manufacturer.
  3. Consequential Bodily Injury - Filed by a family member for injuries suffered as a consequence of the employee’s injury, such as a heart attack upon learning of the accident. 

Unforeseen incidents arise on the job daily. Please make sure that your business, which you have worked so hard to develop, is protected. Ask your broker if you have enough coverage under your Employer’s Liability policy. 

Want to learn more? At Core Benefits Group, we have the answers. Please call us at 1-877-214-2969.

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