Glossary term
Employer's Liability Insurance
Employer's liability insurance helps cover certain employee injury claims against an employer that are not fully handled by workers' compensation.
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What Is Employer's Liability Insurance?
Employer's liability insurance helps cover certain claims against an employer related to employee injury, illness, or death arising from work. It is commonly included as Part Two of a workers' compensation policy.
Workers' compensation generally pays statutory benefits without requiring the employee to prove fault. Employer's liability coverage addresses certain lawsuits or claims that fall outside the basic workers' compensation benefit structure.
Key Takeaways
- Employer's liability insurance is closely tied to workers' compensation coverage.
- It can help with defense costs and covered damages from certain employee injury claims.
- It does not replace legally required workers' compensation insurance.
- Limits, exclusions, state rules, and monopolistic state arrangements can affect coverage.
What It Can Cover
Employer's liability coverage may respond to claims alleging employer negligence, third-party-over actions, loss of consortium, or consequential injury claims, depending on policy wording and state law.
Claim Type | Basic Idea |
|---|---|
Employee lawsuit | Claim that an employer's negligence caused injury. |
Third-party-over claim | A third party sues the employer after being sued by the injured employee. |
Loss of consortium | Family member claim tied to the employee's work injury. |
Consequential injury | Claim by another person affected by the employee's injury. |
Relationship to Workers' Compensation
Employer's liability is not the same as workers' compensation benefits. Workers' compensation pays benefits required by law. Employer's liability is a liability coverage that can defend and pay covered claims against the employer.
Some states have monopolistic workers' compensation systems where employers buy workers' compensation from a state fund and may need separate stop-gap coverage for employer's liability exposure.
What to Review
Businesses should review limits, exclusions, employee definitions, out-of-state work, subcontractor issues, and whether coverage applies in every state where employees work.
The Bottom Line
Employer's liability insurance fills part of the gap between workers' compensation benefits and lawsuits against the employer. It is a small but important part of workplace risk management.