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Suppose an employee of your company develops arthritis from doing repetitive tasks, but the state you live in does not recognize arthritis as an injury covered by workers’ compensation. Thus, your business is left open to a claim from the employee that could cost you significantly, or the employee is left with no recourse to cover medical expenses.

Tough situation, right?

Employer’s liability insurance could protect you in such a case, as well as provide payments to the injured employee. The coverage protects companies from major financial losses if a worker experiences a job-related illness or injury not covered by workers’ compensation.

What Does Employer’s Liability Insurance Cover?

This insurance, combined with workers’ compensation, protects against expenses from deaths, illnesses, and injuries in the workplace. Employer’s liability insurance is also known as “part 2” of a workers’ compensation policy.

Most workers, other than federal employees, have protection provided by workers’ compensation laws mandated individually by the states. Most companies must, by state law, have workers’ compensation insurance. The mandated insurance will pay a certain amount for lost wages and medical expenses to employees or their beneficiaries when an employee is sickened, killed, or injured on the job. As a result, an employee does not have to sue his or her company to prove fault to receive the workers’ compensation.

If, on the other hand, the employee doesn’t believe the coverage completely pays for losses or feels an employer’s negligence caused the injury, he or she may sue the company in an attempt to receive punitive damages for pain and suffering.

Employer’s liability coverage protects companies and pays for expenses not covered by workers’ compensation or a general liability insurance policy. In addition, affected employees must release an employer and insurance company from additional liability to receive damages for their lost wages or injuries.

Employer’s liability coverage will protect against a number of possible claims not covered by workers’ compensation, including:

  • Third-party cross claims. If an employee injured in a vehicle that the company owns sues the manufacturer of the vehicle, the manufacturer may sue the company the employee worked for. The manufacturer may claim the company the employee worked for failed to adequately maintain the vehicle in a safe, working condition.
  • Intentional acts by the employer. For example: The owner of a coal mine might be sued for sending workers to work even though he knew there was methane gas in his mine.
  • Consortium and other loss of services to family members. This might be claimed by family members whose loved one dies in an injury at work as a part of the alleged wrongful actions of an employer. In addition, it might be claimed if an injured loved one is unable to provide for his or her family.
  • Dual capacity claim. This is when an employee has two or more relationships with the same company, and the company could be liable under any of these relationships. For example, if an employee is injured while driving a machine with a defective blade at work, he or she could receive workers’ compensation. He or she could also sue the employer as the manufacturer of the blade.

Read More: Workplace Safety Tips: Preventing Accidents and Insuring Your Company

How It Works With Other Types Of Insurance

Worker’s liability insurance provides for situations not covered by either workers’ comp or general liability coverage. General liability protects a company from lawsuits and similar claims within a policy. General liability protects a company from property damage and personal injury claims that come out of the premises, products, or operations of a company.

Employer’s liability insurance provides coverage up to a specified dollar amount in the purchased policy, per bodily injury, incident, or disease. Workers compensation, on the other hand, does not have a cap on the maximum amount paid in damages.

Coverage for employer’s liability can provide protection other insurance does not and can protect a company against a major financial loss. If you have any questions about the coverage, or anything else related to business insurance policies, feel free to contact us.