How Employer’s Liability Insurance Work?
Most private-sector employees are covered by state workers' compensation laws, while federal employees follow federal laws. States usually require employers to have workers' compensation insurance.
Workers' compensation covers medical expenses and lost wages for employees injured, sickened, or killed on the job. Employees do not need to sue their employers to receive these benefits.
However, if an employee feels workers' compensation is insufficient, possibly due to employer negligence, they may sue for additional damages like pain and suffering.
This is where employers' liability insurance helps. It covers expenses not included in workers' compensation or general liability insurance, providing extra protection for businesses against financial losses.
Employers' liability coverage is usually bought together with workers' compensation and is often referred to as "part 2" of a workers' compensation policy. Part 1 of the policy is the "workers' comp" itself, which covers medical and death expenses as well as partial lost wages due to work-related injuries and illnesses. Part 2, the employers' liability coverage, protects the business from claims for additional damages and compensation.
Who Do Require Employers’ Liability Insurance?
Any business or employer that requires protection from financial loss because of a work-related illness or injury needs employers' liability insurance. Even if the company has strict safety protocols at its workplace, accidents can occur. Sometimes even a single injury at the workplace can impact the entire business if the employer is not insured adequately.
How Do I Know If I Have Sufficient Employers’ Liability Coverage?
There is no limit on how much an employers' liability insurance policy can cover for an injury or illness, however, it does have some limits. It depends on the employer to know how much cover is sufficient for its employees. The businesses that are at high risk of employees’ lawsuits can consider can opt for wider coverage so that they can get coverage for almost all.
Limitations of Employers’ Liability Insurance
Since an employers’ liability insurance provides coverage against claims of employees, but if an employer deliberately aggravates the work-related illness or injury of an employee, then this liability insurance will not provide coverage for the financial obligations of the employers to the employee and in that case, the employer has to pay to the employee if the employee wins his/her case in the court.
Employer’s liability insurance also puts limitations on what has to be paid per employee, per illness, and injury.
The Final Words!
Even with adequate coverage provided by employers' liability insurance, claims may become costly and complicated for employers especially when it comes to lawsuits. The cost to defend against these lawsuits can be a big financial loss.
This is why many companies choose to have employers' liability insurance to help to get the costs of defending the company from different types of lawsuits. A claim may be legitimate or may not be, but even then, there is a business that cannot take that level of risk.
You may also read: Liability Insurance Glossary
Expert advice made easy
