The Value of Employer’s Liability Insurance – When Workers’ Compensation Isn’t Enough

Do you own or run a business? If you’re like many business owners, you may think that all work-related injuries are covered by workers’ compensation benefits. However, sometimes there are exceptions. That’s why employer’s liability insurance is needed. Here’s what you need to know about employer’s liability insurance, along with some considerations and warnings.

What Is Employer’s Liability Insurance?

Perhaps you’ve heard of employer’s liability insurance but aren’t quite sure what it is. Put simply, employer’s liability insurance (ELPI) is a type of commercial insurance is designed to protect employers from monetary loss when workers have a job-connected illness or injury that isn’t covered by workers’ compensation. That’s why it’s also known as “Part 2” of a policy for workers’ compensation.

How It Works

State workers’ compensation laws cover most employees. In fact, states require most employers to have workers’ compensation insurance. It provides some degree of coverage for medical costs, besides lost wages for employees with work-related illnesses or injuries.

But when employees feel that workers’ compensation fails to fully cover their financial loss from work-related injuries or illnesses caused by an employer’s negligence, they may choose to sue their employer for pain, suffering and other punitive damages. This is where employer’s liability coverage comes in as it’s designed to cover costs that aren’t covered by general liability insurance or workers’ compensation. If a payout occurs under employer’s liability, the employer has the right to limit his or her losses by having what’s known as a condition of the payout. This is a clause releasing the employer, along with their insurance provider, from additional liability linked to the situation.

What Employer’s Liability Protection Insurance Covers

Employer’s liability protection insurance provides coverage for claims, such as:

Third-party countersuits—As an example, imagine having an employee who’s injured from faulty equipment. The injured employee can also sue the malfunctioning equipment manufacturer. When this occurs, the manufacturer’s attorney can sue your business, claiming the accident happened because the equipment wasn’t properly maintained. Since workers’ compensation can’t help you, you’ll need employer’s liability insurance to fight your case.

Dual capacity suits—This is a lawsuit in which an employee sues the employer in the case of an injury resulting from a product that’s produced by the employer. Hence, the employer is liable not only as an employer but also as the manufacturer of the product. Again, workers’ compensation is unable to fight this type of complex case, so this is where employer’s liability insurance steps in.

Loss of consortium is another reason for employer’s liability insurance. Usually, employees receiving benefits from workers’ compensation claims are unable to sue their employers. But the spouses of injured employees can sue a business, claiming they’ve suffered from financial losses because of the injury. When this occurs, you need employer’s liability insurance.

Gross negligence claims—This is a claim resulting from a manager forcing an employee to do a knowingly dangerous job that can cause an injury or make the company liable. Workers’ compensation is useless in this situation, so this is another reason to have employer’s liability.

What Not Covered

Employer’s liability coverage does not cover every situation, such as those involving: 

• Criminal acts and fraud
• Exemplary or punitive damages as a result of an injury from an employee who has deliberately violated the law with the employer being aware of the violation.
• Purposeful body injury that’s caused or provoked by the employer
• Claims arising from downsizing, layoffs, workforce restructurings, plant closures, strikes, mergers or acquisitions

Other Considerations and Warnings

• Chances are, you need employer’s liability insurance if you own your own workplace building and premises, equipment and materials. If you’re paying for national insurance for any members of your staff, you should have this coverage.
• Furthermore, employer’s liability is needed if you’re the one controlling the way in which your employees perform their work, besides where they work. 
• In most states, worker’s compensation policies include employer’s liability coverage already. Therefore, there’s no need to be concerned that you’ll have any gaps when it comes to employee-related injuries.
• When talking to an insurance agent, be realistic about all your business risks so that you receive comprehensive coverage. In other words, don’t hold back anything when discussing your needs and risks.
• Thoroughly go over all the terms and conditions of your policy, ensuring all the requirements for your company are totally covered.

Questions? Call the commercial insurance specialists at InsureYourCompany.com. Although we work with a wide range of businesses, we mainly focus on single LLC’s in tech and small New Jersey businesses. Please contact us to find out more about our many high-quality products.

One of the major benefits of group health insurance is that it is often more affordable than individual insurance. Since the risk is spread out over the entire group, each person pays a lower premium than they might have to pay on their own (depending upon the type of policy purchased).

For employees, joining their employer’s group policy also means ensured coverage. People looking for individual policies outside the workplace may have a harder time getting covered or may pay a much higher premium if they have pre-existing conditions. This is not the case with a group policy from the employer.

When an insurance company is determining the rates for your group health insurance policy, it needs to take a few factors into consideration. The size of your company and who is receiving coverage will determine the rates for each member of your group.

Employee Name

The insurance company needs to know who they are insuring!

Number of Dependents

Employees have the option to add dependents, like a spouse or children, to their policy. People with dependents on the policy will pay higher rates than an individual to account for the additional people on the policy.

Date of Birth

As you get older, you pay a slightly higher premium than you did the year before. Premiums will naturally be a little higher if your group is mostly people over the age of 50 versus a group of most people under the age of 30. This is simply because as we age we’re more likely to encounter both major and minor health concerns.

Zip Code

Believe it or not, life expectancy varies not only from country to country but from state to state and even neighborhood to neighborhood. Your living environment partly determines your health: things like good air quality and access to hospitals, healthy food, fitness facilities, and jobs that allow you to provide a healthy lifestyle for yourself and your family can help you avoid getting sick. Not every part of a city has the same access to these types of services, and it impacts the health of the people living in those communities. This is taken into consideration when determining insurance rates.

What is Not Permitted on the Census

Insurance companies are not allowed to ask about your employees’ health status or history. Employees are eligible for your group plan no matter what. They may also not ask about sexual orientation, race, religion, immigration or citizenship status, or an employee’s social security number. All those factors are irrelevant when determining rates for your group.

Why the Census is Important

An insurance company needs a place to start when determining your rates and that’s why the census is so important. Without it, there would be no choice but for an insurance company to use the same (high) rate for everyone. With your group’s basic demographics in mind, the rate is customized to fit your group. With the information provided in the census, an insurance company is then able to give you a quote for individuals, families, and couples.

We can help you put together a group health insurance plan for your employees along with group dental, vision, life, and more. We know that insurance can seem confusing, but we’re here to make it as simple as possible for you so you can provide affordable coverage for your valued workers. We stay up-to-date on all changes in industry rules and regulations so you can be sure your plan meets the requirements. Contact us to learn more about group health insurance and to ask any questions you might have about the census.

“Chase the vision, not the money; the money will end up following you.”  –Tony Hsieh, Zappos CEO

Hsieh expresses a basic tenant of business success. But money is important to your success. You can remain true to your vision without the exhaustion of dealing with overdue invoices and ill well generated if you are perceived as an obnoxious and annoying bill collector. Your clients and customers should have a positive experience from the first time they see your business name until their business with you is concluded. Prevent billing issues right from the first sale by having a solid billing plan that you and your employees faithfully follow.

Begin with what forms of payment you will accept. Everyone loves cash, but you should have a way to check large bills for counterfeiting. Your customer may not know the bills are counterfeit, so handle this issue carefully. Never blame the client for trying to use the fake currency. Assume he has been duped. Fitssmallbuisness.com details how to check for counterfeit currency. Every employee authorized to accept cash should know how to spot a fake bill. If in doubt, a nearby bank can verify the currency but check with them before you open for business. You don’t want to be running around with your customer looking for a bank. If this system is in place, your business will look organized and the process will be seen as part of the transaction. Checks are chancy, but checks from a local bank are more likely to be paid. Choose credit cards that offer a way for you to verify the purchase will be paid for. For on-going payments, automatic withdrawals from a client’s bank account seldom fail. For large charges, electronic funds transfers are an immediate way for you to collect what is owed.

The terms of payment are also important. If the transaction is small, inform the customer which forms of payment are accepted. For a service such as construction and landscaping, you will want a contract. This contract, signed by both parties, should detail exactly what services will be provided and a good faith estimate of the cost, itemized by materials and labor. The contract should include a payment clause. When is a payment due: half down before work starts? after project completion? how long after completion? The contract protects the customer from worries about unexpected charges and protects your right to be paid for the materials and services you provide.

Despite thoughtful payment policies, you will likely have a problematic billing issue now and then. “Panic last” is one of the personality traits of a successful business owner. A friendly phone call is a good first step. Some payments may be late for a good reason or the bill “slipped my mind.” The call reminds them. Be prepared to offer payment options that you can live with such as payment at a later specified date. Be sure to follow this option up with a letter. Mailed overdue notices are easy for the sender to ignore and so impersonal they may seem insensitive. Perhaps a family member has been hospitalized and extra time is needed for the household paperwork. With a phone call, you can express your sympathy and help to become part of the solution.

When all else fails, you may want to turn the problem over to a collection agency, which will cost you 30 percent or more of the debt collected. You can also file a claim in small claims court. This is where a contract proves the terms of the transaction.

When it comes to billing and claim issues, often it makes good business sense to seek outside services. We can tell you about what resources you need to manage this aspect of your business. To learn how we can help, please Contact Us.  We look forward to talking with you and becoming part of your vision for a successful business.