What Is Employer’s Liability Coverage and Why Do You Need It?

If you are a business owner with employees, you may have heard of employer’s liability coverage.

Employer's liability coverage
Employer’s Liability Coverage

But what is it exactly, and how does it differ from workers’ compensation insurance?

In this article, we will explain the basics of employer’s liability coverage, what it covers, and why it is important for your business.

What Is Employer’s Liability Coverage?

Employer’s liability coverage is a type of insurance that protects your business from lawsuits filed by your employees or their families for work-related injuries, illnesses, or deaths that are not covered by workers’ compensation.

Workers’ compensation is a mandatory insurance that provides medical and wage benefits to your employees who get hurt or sick on the job, regardless of who is at fault.

However, workers’ compensation does not cover all the costs and damages that may arise from a workplace accident, such as pain and suffering, emotional distress, or loss of consortium.

In some cases, your employees or their families may sue you for these additional damages, alleging that you were negligent or responsible for their harm.

This is where employer’s liability coverage comes in handy.

It can help you pay for the legal fees, settlements, or judgments that may result from such lawsuits.

What Does Employer’s Liability Coverage Cover?

Employer’s liability coverage typically covers the following types of claims:

Infographics Does Employer's Liability Coverage Cover?
What Does Employer’s Liability Coverage Cover?

1.Third-party action

This is when an employee sues you after being injured by a third party, such as a vendor, customer, or contractor, on your premises or while performing work-related duties.

For example, if an employee is bitten by a dog while delivering a package to a client, they may sue you for failing to provide a safe work environment.

2.Loss of consortium

This is when a spouse or family member of an injured or deceased employee sues you for losing the companionship, affection, or support of their loved one.

For example, if an employee dies from a work-related illness, their spouse may sue you for loss of consortium.

3.Dual-capacity suit

This is when an employee sues you in a different capacity than as an employer, such as a manufacturer, landlord, or service provider.

For example, if an employee is injured by a defective product that you manufactured or sold, they may sue you for product liability.

4.Consequential bodily injury

This is when a family member of an injured employee suffers a physical or mental injury as a result of the employee’s injury.

For example, if an employee is paralyzed from a work-related accident, their spouse may suffer from depression or anxiety and sue you for consequential bodily injury.

Why Do You Need Employer’s Liability Coverage?

Employer’s liability coverage is important for several reasons:

1.It can protect your business from financial losses

Lawsuits filed by your employees or their families can be costly and time-consuming.

Without employer’s liability coverage, you may have to pay for the legal expenses and damages out of your own pocket, which can jeopardize your business’s financial stability and reputation.

2.It can complement your workers’ compensation insurance

Workers’ compensation insurance is not enough to shield your business from all the potential liabilities that may arise from workplace accidents.

Employer’s liability coverage can fill the gaps and provide you with an extra layer of protection.

3.It can be required by law or contract

Some states or industries may require you to have employer’s liability coverage as part of your workers’ compensation policy.

Additionally, some clients or partners may ask you to have employer’s liability coverage as a condition of doing business with them.

FAQs

Here are some frequently asked questions about employer’s liability coverage:

How much does employer’s liability coverage cost?

The cost of employer’s liability coverage depends on various factors.

Typically, employer’s liability coverage is included in your workers’ compensation policy as Part 2 or Part B.

You can contact your insurance agent or broker to get a quote for your specific business.

How much employer’s liability coverage do I need?

The amount of employer’s liability coverage you need depends on your risk exposure and preference.

Most workers’ compensation policies provide a standard limit of $100,000 per employee.

However, you may choose to increase your limits or purchase a separate umbrella policy for additional coverage.

What are some examples of employer’s liability claims?

Here are some examples of employer’s liability claims that have occurred in the past:

1.A construction worker fell from a scaffold and suffered a spinal cord injury.

He sued his employer for failing to provide proper safety equipment and training.

The employer’s liability coverage paid for the legal fees and a $1.5 million settlement.

2.A nurse contracted hepatitis C from a needlestick injury while treating a patient.

She sued her employer for negligence and emotional distress.

The employer’s liability coverage paid for the legal fees and a $250,000 settlement.

3.A delivery driver was involved in a car accident and died.

His widow sued his employer for wrongful death and loss of consortium.

The employer’s liability coverage paid for the legal fees and a $500,000 settlement.

Conclusion

Employer’s liability coverage is a vital insurance for any business with employees.

It can protect your business from lawsuits filed by your employees or their families for work-related injuries.

It can also help you comply with the law or contract requirements and maintain your business.

To learn more about employer’s liability coverage and how to get the best policy for your business.

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