When Do You Need Employers’ Liability Coverage?

The standard workers’ comp policy covers almost all liability of an employer for its employees. It covers the costs associated with an employee’s work-related injury or occupational disease. It pays for the worker’s medical costs, rehabilitation costs, lost wages and any settlement for permanent disability. But we say the standard workers’ comp policy covers "almost all" employer liability because an employer can still be sued for damages that fall outside of workers’ comp coverage. The employers’ liability section of the workers’ comp policy adds coverage for several types of claims not covered by the standard workers’ comp policy — or Part I, as it’s commonly called. Insurance authority IRMI cites the following instances when employers liability coverage might apply.

• Wrongful death: The family of a deceased worker may file a common-law claim seeking damages in addition to the death benefit paid by workers’ comp.

 

• Consequential bodily injury: A family member may file a lawsuit for his or her own injury (for instance, a heart attack) that was caused by learning about or dealing with the injured employee. 

 

• Loss of consortium: The spouse of an injured worker may sue for loss of consortium, which means the spouse has lost the services — such as sexual relations or the ability to do household chores — of his or her spouse. Damages can be awarded even if the spouse is receiving disability payments. 

 

• Third-party liability: If an employee is injured while using equipment that malfunctioned, he or she may sue the manufacturer of the equipment for negligence. The manufacturer may in turn sue the employee’s company to recover damages. Depending on the specifics of the claim, either the employers’ liability or a general liability policy can provide coverage.

 

• Employees excluded from workers’ comp: In some states, seasonal and temporary workers can be excluded from workers’ comp. In other states some small employers do not have to buy comp. In those situations, an employers’ liability policy can provide protection from employee lawsuits for bodily injury and illness.