Employers Liability Insurance: What It Covers | Pro Insurance

Most business owners assume workers compensation fully closes the book on employee injuries. It does not. Workers compensation pays no fault benefits like medical care and lost wages, and in exchange employees generally give up the right to sue. But several categories of lawsuits survive that bargain, and when one lands, employers liability insurance is the coverage that answers. Here is how it works, what it covers, and where the gaps are.

Workers Comp Part One vs. Part Two

A standard workers compensation policy has two parts. Part One is workers compensation itself: the no fault benefits your state requires. Part Two is employers liability: coverage for the lawsuits that fall outside the no fault system. You buy them as one policy, which is why many owners never realize the second coverage exists until they need it.

What Employers Liability Insurance Covers

Employers liability responds to four classic claim types:

Third party over actions. An injured employee collects workers comp, then sues a third party such as an equipment manufacturer. That manufacturer turns around and sues your business, claiming your negligence contributed to the injury. Employers liability defends you.

Dual capacity suits. When your business relates to the employee in a second capacity, for example as the manufacturer of a product that injured them, the employee can sue you in that second capacity despite collecting workers comp.

Loss of consortium. A spouse or family member sues for the loss of companionship and support resulting from a workplace injury. These claims come from someone who never agreed to the workers comp bargain.

Consequential bodily injury. A family member suffers their own injury as a consequence of the employee's injury, such as a spouse who suffers a breakdown caring for a badly injured worker.

In every case, the policy pays attorney fees, court costs, settlements, and judgments up to your limit, even when the suit ultimately fails. Defense costs alone on a serious injury claim routinely reach six figures.

Standard Limits, and Why Contracts Often Demand More

The default limits on nearly every policy are $100,000 per accident for bodily injury, $500,000 as the policy limit for bodily injury by disease, and $100,000 per employee for disease. Many commercial contracts, leases, and municipal jobs require $500,000 or $1 million at each limit. You can get there two ways: an increased limits endorsement on the workers comp policy, or a commercial umbrella policy that sits over your employers liability along with your other liability coverage.

The Monopolistic State Gap

In North Dakota, Ohio, Washington, and Wyoming, employers buy workers compensation from a state fund, and those state policies do not include employers liability at all. Businesses in those states, or with employees working in them, close the gap with stop gap coverage, usually added as an endorsement to a general liability policy. If you operate across state lines, this is one of the easiest coverage gaps to miss.

What Employers Liability Does Not Cover

Employers liability handles injury lawsuits, not employment disputes. Claims of wrongful termination, discrimination, harassment, or retaliation belong to employment practices liability insurance (EPLI), a separate policy that confused buyers often assume they already have. Employers liability also excludes intentional injuries, fines and penalties, and claims from employees hired in violation of the law.

What It Costs

At standard limits, employers liability is built into your workers compensation premium, so most businesses already carry it without a separate line item. Raising limits to meet contract requirements typically adds a small percentage to the premium, and stop gap coverage in monopolistic states is inexpensive relative to the exposure. As an independent broker, we review your limits against your actual contracts, since underinsured employers liability is one of the most common findings in our policy reviews.

Have your workers comp and employers liability limits reviewed for free.

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