Workers’ Compensation 101: What Does Employers Liability Insurance Cover?

Workers’ Compensation 101: What Does Employers Liability Insurance Cover?

Did you know that a standard workers’ compensation insurance policy has more than one part? It’s true, check for yourself. Part One Workers Compensation Insurance provides indemnity and medical benefits that employers are legally required to provide employees who are injured on the job. You probably knew that already.

But, if you keep reading, you will see that Part One is followed by…Part Two Employers Liability Insurance. What could that possibly cover?

Part Two of a standard workers’ compensation policy covers employers for liability arising out of an employee’s work-related injury, death or disease that is not otherwise covered under a state’s workers’ compensation laws. Unless otherwise excluded under the policy, Employers Liability Insurance will typically respond to a variety of claims that stem from an employee’s work-related injury, including the following common claims.

Third-Party Over. Despite providing workers’ compensation insurance, an employer may end up being held indirectly liable for an employee’s workplace injury. Third-party over claims occur when: 1) an employee sues a third-party to recover damages for their workplace injury; and 2) that third-party then turns around and attempts to hold the employer responsible for the employee’s lawsuit.

For example, assume an employee injured by workplace machinery sues the machine’s manufacturer for damages. A third-party over situation would occur if the manufacturer tries to recover money it paid to the employee by suing the employer for negligently failing to maintain the machinery.

Loss of Consortium. Consortium generally refers to one spouse’s legal right to the company, affection, assistance, service, companionship and marital relations of the other spouse. The spouse of an injured employee may bring a claim for care and loss of services.

Consequential Bodily Injury. An injured employee’s spouse, child, parent or sibling may sue the employer for their own bodily injuries that are a direct consequence of the bodily injury suffered by the employee. Examples may include a spouse who develops migraine headaches or a parent who has a stroke induced by the stress caused by their child’s workplace injury.

Dual-Capacity. Depending on the circumstances, an injured employee may be able to sue their employer in a nonemployment-related capacity. For example, an employer may be sued as the manufacturer of the machinery that injured the employee or the landlord that failed to adequately maintain the premises.

Employers Liability Coverage is automatically included in standard workers’ compensation policies available in most states. But, North Dakota, Ohio, Washington and Wyoming only allow workers’ compensation insurance purchased from a compulsory state fund. Employers in these ‘monopolistic’ states must purchase stop-gap coverage, which is essentially an Employers Liability Coverage endorsement added to a General Liability policy.

Please contact us if you have any questions about Worker’s Compensation and Employers Liability Insurance Coverage. You can subscribe to our newsletter to receive regular insurance and risk management informational updates.