Employer's Liability Insurance: Protecting Your Business and Employees
Employers' liability insurance serves as protection for businesses facing liability claims relating to an employee's job-related injury that are not covered under workers' compensation. It's a specific type of liability coverage that complements workers' compensation, offering added financial security for employers dealing with liability linked to workplace-related injuries.
As your business expands, it naturally encounters increased liabilities and risks. With the growth in personnel, market reach, and revenue, there's a simultaneous rise in exposure to losses. While these achievements signify progress, they also bring forth additional obligations and potential hazards. It's crucial to assess the most significant risks your organization faces and take appropriate steps to mitigate them. The insurance coverage needed will vary based on your industry and the specifics of your business operations.
Importance of Employers' Liability Insurance
Workers' compensation covers the statutorily required benefits employers owe to staff, such as employee medical expenses from an on-the-job injury, employee lost wages if time off is needed to recuperate, and death benefits for a fatality. Employers' liability will respond to liability claims and lawsuits relating to the employee injury but not covered by workers' compensation insurance. Typically, this coverage comes into play when the employee or their family alleges that the employer was negligent for the injury that occurred.
Say, for example, an employer sent employees to a demolition site of an old building that had asbestos in it. The employer knew about the presence of this substance but did not notify the employees of its presence, nor was personal protective equipment supplied that may have shielded the employees against illness and disease. Subsequently, the employees suffered greatly from the exposure to asbestos. In this situation, it would seem that the employer was negligent, and when sued, the employer' Liability coverage in the worker's compensation policy would respond to this lawsuit. Damages may include pain and suffering, loss of spousal consortium, and loss of future earnings, among others.
Financial Protection: Without both of these coverages, businesses might face substantial financial burdens due to compensation claims and legal fees for liability lawsuits relating to workplace accidents or occupational diseases. When businesses are in a monopolistic state that requires workers' compensation to be purchased from the state fund, it is important for companies to purchase a separate Employers' liability Insurance policy to assist in covering these types of claims since the state policy does not include employers' liability coverage. This is when employers' liability is also referred to as stop-gap coverage.
Understanding the Difference: Employers' Liability Insurance vs Workers' Comp Insurance
Employers' liability Insurance is usually included with Workers' compensation insurance. However, in the four US states (also called Monopolistic States) of North Dakota, Ohio, Washington, and Wyoming, you will have to purchase this insurance policy separately. If you acquired workers' compensation coverage from a state fund, you would need to obtain employer's liability insurance separately. You can usually secure this coverage by including an endorsement to your general liability insurance policy for stop-gap liability.
In most states, when a company invests in workers' compensation insurance, they're also obtaining employers' liability insurance. Workers' compensation covers the required benefits provided to an employee following a workplace injury. On the other hand, employers' liability insurance steps in if an employee or their family takes legal action against the company due to the liability an employer owes for its negligence.
These insurances are commonly bundled together within a company's comprehensive business insurance program. Workers' compensation addresses the statutory obligations outlined by a state's specific compensation laws. Meanwhile, employers' liability extends coverage in cases where an employee perceives the workers' comp benefits as insufficient and alleges employer negligence.
Consider a scenario where a factory worker wants the company to purchase a particular tool made by a reputable company with high-quality materials.
The employer disagrees and purchases a cheaper tool since it will save the company money. Unfortunately, while using the cheaper tool, it breaks, causing the employee severe injury. Despite filing for workers' compensation, the worker feels inadequately compensated. He gets an attorney who files a lawsuit against the employer, alleging negligence due to the use of a cheaper tool. Employers' liability insurance would cover the associated defense expenses and settlement for covered incidents.
Summarizing everything we have discussed here, we can conclude that employers' liability insurance and workers' compensation aren't the same things. While workers' compensation insurance assists employees in covering medical bills and related expenses resulting from workplace injuries or illnesses, employers' liability insurance, on the other hand, supports employers by handling legal costs in case an employee or their family files a lawsuit against the employer for negligence in causing work-related injuries or occupational disease.
We'd also add that employment practices liability insurance (EPLI) is also distinct and different coverage from employers' liability insurance. EPLI shields business owners from various employment-related claims, such as wrongful termination, discrimination, wage law violations, or harassment. While employers' liability coverage primarily safeguards a business owner from legal actions stemming from employee physical bodily injuries or illnesses incurred at work, EPLI focuses on protecting against claims related to mental anguish, hostile work environment, and other employment issues.
While the advantages of employers' liability insurance have been adequately discussed in this article, we would like to point out some limitations of its coverage. Many insurance seekers still become confused between workers' compensation, Employment practices liability, and employers' liability insurance. We aim to clear up this confusion.
Exclusions: Certain situations might not fall under the coverage of Employers' liability Insurance, such as injuries resulting from employee misconduct, self-inflicted injuries, or incidents occurring outside the scope of employment duties. Please note that it is favorable for a business owner to resolve any medical claims with workers' comp as it usually can tackle medical expenses.
Coverage Amounts: Policies vary in coverage limits. Businesses should carefully evaluate and select appropriate coverage amounts based on their workforce size, industry risks, and potential liabilities. The typical employer liability limit often stands at $100,000/$500,000/$100,000. This translates to $100,000 per accident, $500,000 per policy for disease, and $100,000 per employee for disease.
Employers' Liability Insurance is a fundamental protective measure for businesses and employers from liability lawsuits relating to work-related injuries or occupational disease. By offering
financial support, this insurance plays a pivotal role in protecting employers from the legal ramifications of employee injuries.
Whether mandated by law or not, obtaining Employers' liability Insurance is a proactive step toward mitigating risks, ensuring the well-being of employees, and safeguarding the financial stability of a business. The best part about this policy is that baring the four states, workers' comp insurance automatically incorporates this policy coverage. So, you don't have to opt for this coverage exclusively. Also known as Part 2 or Coverage B of the workers compensation policy. It constitutes a minor portion of the overall workers' compensation insurance premium.
Always consult with insurance experts or legal advisors to comprehend the specific requirements and nuances of employers' liability insurance to tailor the coverage according to the business's unique needs and potential risks.
Alternatively, you can go to our website, www.insuranceadvisor.com, and request a quote for workers' compensation, including employers' liability.
Also Read: Is Business Insurance Mandated By Law?
Frequently Asked Questions about Employer Liability Insurance
The cost of Employer Liability Insurance varies depending on the size of the business, the industry, and the state. It is included in Workers' Compensation policies in non-monopolistic states, and the cost is typically a percentage of the total Workers' Compensation premium.
Employer Liability Insurance covers liability claims or lawsuits for employers' negligence relating to on-the-job employee injuries or diseases not covered by workers' compensation. General liability policies exclude coverage for employee injuries and any liability resulting from the injury.
Some common policy exclusions in Employer Liability Insurance include any benefits payable by workers' compensation, employer criminal acts, fraud, intentional profit or advantage, purposeful violation of the law, and claims related to sexual harassment, wrongful termination, and other employment-related issues.
The claims process for Employer Liability Insurance involves an allegation of negligence against the employer by the employee or their family. Typically, a lawsuit will be filed, and the determination of legal liability will be made by a court of law. Suppose the court determines an employer is liable. In that case, there may be negotiations to determine a monetary amount for damages and an appropriate settlement offer.
When choosing limits for Employers' Liability Insurance, consider factors such as your business's size, industry, state, and potential risks. Higher limits may be necessary for businesses with a higher risk of employee lawsuits or those required to carry higher limits by contractual agreements.
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