Employers Liability Insurance Policy Information
Employers Liability Insurance. Most business owners know the importance of workers compensation insurance to protect themselves from claims for injury by those they employ. However, businesses have realized that workers comp doesn't cover everything. The exceptions in this widely mandated employee benefit have prompted businesses to develop a companion product called employers liability insurance.
In many states, employers liability insurance in included in a workers compensation policy. Employers liability insurance protects you against suits brought against you by employees for injuries due to accidents or diseases that arise from their employment by you.
The main difference between workers comp and employers liability is that workers compensation applies to statutory benefits the named insured must pay. Employers liability applies to common or tort law or other damages for which the named insured is liable.
Employers Liability insurance protects your business from lawsuits from injured employees with rates as low as $47/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked employers liability insurance questions:
- What Is The Difference Between Workers Compensation vs Employers Liability Insurance?
- What Does Employers Liability Insurance Cover?
- Is Employers Liability Insurance Required?
- Why Do I Need Employers Liability Insurance?
What Is The Difference Between Workers Compensation vs Employers Liability Insurance?
Workers compensation coverage and employers liability coverage interact with one another and work together. Understanding that is essential to understanding what stop gap coverage is, how it works, and who needs it. Workers compensation pays benefits to employees injured on the job without regard to fault. In return, the injured worker gives up his or her right to sue the employer.
Workers compensation coverage is usually (but not always) the exclusive remedy for employee injuries. Situations develop from time to time where an employer liable for injuries to its employees can be sued.
What Does Employers Liability Insurance Cover?
Employers liability insurance covers bodily injury by accident and bodily injury by disease, including resulting death. The injury or disease must arise out of and be in the course of the injured worker's employment and be necessary or incidental to the work in a state.
Bodily injury by accident must occur during the policy period. Bodily injury by disease must be caused by or be aggravated by employment conditions. The worker's last day of last exposure to those conditions that cause or aggravate the bodily injury by disease must occur during the policy period. Legal actions for bodily injury by accident or by disease must be brought in the United States of America, its territories or possessions, or Canada.
The insurance company pays amounts the named insured must legally pay because of bodily injury that this insurance covers. This includes the named insured's liability for damages to a third party due to a claim or suit by that party to recover damages claimed that result from injury to an insured employee.
It also includes damages for care and loss of services and consequential bodily injury to defined family members if the damages are direct consequences of bodily injury to insured employees due to their employment. Coverage also applies to damages because of bodily injury to employees that arise out of and in the course of their employment claimed against the named insured in a capacity other than as an employer.
This coverage applies to damages in tort or other liability, as opposed to the statutory liability for benefits under workers compensation laws.
Not all damages are covered though. First the particular state law must permit recovery. Second the damages must be from one of the following:
- Third-Party Over Actions: An employee of the named insured is injured and that employee makes a claim against a third party. That third party then pursues actions against the named insured to recover for that employee's claim.
- Consequential Bodily Injury: To the injured employee's brother, sister, parent, child, or spouse. This is subject to a requirement that the damages are the direct consequence of a bodily injury incident that arises from and occurs during the course of that employee's employment by the named insured.
- Loss Of Consortium: This type of lawsuit is filed by the spouse of an employee that was injured on the job. Their spouse can sue for injuries that result in the loss of a family relationship, such as when an employee was severely injured or killed at your workplace.
- Dual-Capacity Suits: Because of bodily injury to the named insured's employee that arises from and in the course of employment and is claimed against the named insured in a different capacity than as an employer. Employers liability also covers damages an employer owes under the so-called "dual capacity" doctrine. It states that an employer may have two different legal personalities for purposes of liability to an employee.
This is the indemnity provision of employers liability insurance. The company pays all amounts the insured employer is legally responsible for as damages because of bodily injury that this policy covers. "Damages" is the key word. Employers liability insurance is coverage against torts or other liability for damages. This contrasts with the employer's statutory liability for workers compensation benefits.
Employers liability insurance does not apply to true no-fault federal workers compensation laws, like the United States Longshore and Harbor Workers Compensation Act (USL&HWCA) WC can provide such true no-fault coverage for USL&HWCA, Federal Black Lung, and other federal laws by endorsing the policy to amend its language to include a federal law or laws.
Is Employers Liability Insurance Required?
The short answer is usually not. Employers liability insurance is not generally bought by itself though. This is because when you have direct employees you almost certainly are required to carry workers compmensation insurance - where it is included as part of that policy in most instances.
If your workers comp policy does not include employers liability insurance, stop gap coverage can fill the gap in that coverage. Stopgap coverage is an endorsement to another commercial policy. You can purchase it from a private insurer, and is usually an addition to your workers compensation insurance policy..
If you need to you can buy Employers Liability directly from an insurer or from a specialist broker. The exact cost of the premium is based on a number of factors including the line of the business, the number of people you employ and your previous insurance claims history.
Why Do I Need Employers Liability Insurance?
Accidents happen, accusations are made, lawyers get involved and people want compensation. Rightly or wrongly these things happen every day and, sooner or later, you will be on the receiving end. A claim won't go away if you ignore it. And there are no shortcuts. So you need employers' liability insurance because you have a business to run; because you have limited funds; because you're not legally trained; and because your reputation matters.
Employer's Liability Insurance Claims
ELI claims wide-ranging. They can and do arise from ex-employees as well as current ones. They can be brought due to a wide range of physical and psychological injuries and/or industrial diseases sustained during the course of employment. Such claims should never be taken lightly or disregarded. Even a minor injury can cost thousands to deal with while more serious injuries or illnesses, can easily lead to claims in the tens or hundreds of thousands of dollars. Some examples are:
- Mental injury or stress not accompanied by any physical injury.
- Nervous shock or fright not accompanied by any physical injury (this may result in serious illness, such as heart attack or stroke).
- Disease brought on over time (e.g. exposure to the elements or extremes of temperature).
'Real Life' Court Cases Involving Employers Liability:
Hoover vs. Maxum Indemnity Company
James Hoover worked for Emergency Water Extraction Services (EWES). On October 20, 2004, Hoover's supervisor asked him to deliver a ladder to a work site where an independent roofing contractor was repairing a roof. While delivering the ladder, the roofing contractor asked Hoover to assist him with something on the roof. Hoover agreed, even though his duties did not include climbing on ladders or making roof repairs. A few minutes later, the contractor asked Hoover to retrieve something on the ground. As he descended the ladder, he fell and sustained a serious brain injury.
Hoover sued EWES in September 2006. EWES forwarded the complaint to Maxum Indemnity Company (Maxum) on October 19, 2006. In a letter dated October 23, Maxum stated that it would not defend or indemnify because there was no coverage due to the employers liability exclusion and because the notice was not provided in a timely manner.
In February 2007, Maxum filed a declaratory judgment action using on the employers liability exclusion as a reason to deny coverage.
Hoover eventually obtained a judgment against EWES in the amount of $16.4 million. Hoover then sued Maxum, alleging breach of duty to defend EWES and seeking indemnification. At this point, Maxum brought up lack of timely notice as a defense.
The trial court found that Maxum could deny coverage because it did not receive timely notice of Hoover's injury. However, the court also found that Maxum breached its duty to defend. Both parties appealed.
The appellate court affirmed the decision regarding timely notice but reversed the finding that Maxum had breached its duty to defend and, the Supreme Court of Georgia agreed to evaluate.
The Supreme Court found that Maxum could not reserve its right to assert a defense of lack of timely notice after denying coverage on other grounds. In reaching its decision, the court noted the importance of a proper reservation of rights. The court concluded that Maxum failed to provide a proper reservation of rights or raise lack of timely notice as a defense and functionally waived its right to assert the defense.
In addition, it determined that the employers liability exclusion did not apply because Hoover was not performing duties related to the conduct of EWES's business when he was injured. The Supreme Court determined that the trial court was correct when it decided that Maxum breached its duty to defend in the underlying tort action.
The Court of Appeals judgment was reversed.
(Hoover vs. Maxum Indemnity Company. Nos. S11G1681, S11G1683. Supreme Court of Georgia. June 18, 2012. 2012 WL 2217040)
Virginia Surety Company, Inc., vs. Northern Insurance Company of New York
Capital Construction Company (Capital), as general contractor at a construction site, hired De Graf Concrete Construction, Inc. (De Graf) to perform work at the site. The contract between them contained an indemnification provision in which De Graf waived its right to "contribution" (distribution of a loss among responsible parties) against Capital and agreed to indemnify Capital in the event of a claim against it arising out of the performance of the work De Graf was hired to do.
As Capital required, De Graf purchased a commercial liability insurance policy from Northern Insurance Company (Northern) as well as a workers compensation and employers liability policy from Virginia Surety Company, Inc. (Virginia Surety). The Northern policy contained an employers' liability exclusion that excluded coverage for bodily injury to "(1) An 'employee' of the insured arising out of and in the course of: (a) Employment of the insured; or (b) Performing duties related to the conduct of the insured's business."
The policy further provided that this exclusion did not apply "to liability as assumed by the insured under an 'insured contract'" "Insured contract" was defined as "That part of any other contract pertaining to your business . . . under which you assume the tort liability of another party to pay for 'bodily injury,' 'property damage' or 'personal liability' to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement."
James Smith, an employee of De Graf, was injured while working at the construction site. He sued Capital to recover expenses associated with his injuries. Capital filed a complaint against De Graf seeking contribution. De Graf tendered defense of Capital's complaint to Northern and Virginia Surety.
Virginia Surety accepted the tender but Northern refused to defend or indemnify De Graf, citing the employers' liability exclusion in its policy. Virginia Surety then filed an action seeking a declaration that Northern had a duty to defend and indemnify De Graf in the contribution action. The trial court found in favor of Northern and Virginia Surety appealed.
On appeal, the Appellate Court of Illinois, Third District, agreed with the trial court and affirmed its decision. In reaching its decision, it emphasized the fact that Capital filed a claim for contribution from De Graf, not for indemnification. Contribution distributes the loss among responsible parties while indemnification shifts the entire loss from one party to another.
For the "insured contract" exception to the exclusion to apply, Capital needed to seek indemnification, not contribution. Capital's complaint alleged only that De Graf should pay for its own negligence. It did not request that De Graf indemnify Capital for its negligence. As a result, the "insured contract" exception to the exclusion in the Northern policy did not apply.
The lower court's judgment was affirmed.
(Virginia Surety Company, Inc., vs. Northern Insurance Company of New York-No. 3-04-0701-Appellate Court of Illinois, Third District-December 22, 2005-840 North Eastern Reporter 2d 1271)
Types Of Small Business Insurance - Requirements & Regulations
Perhaps you have the next great idea for a product or service that you know will appeal to your local area. If you've got a business, you've got risks. Unexpected events and lawsuits can wipe out a business quickly, wasting all the time and money you've invested.
Commercial insurance steps in to help you manage these risks, avoiding a situation which requires you to pay exorbitant costs out-of-pocket.
Insurance is so important to proper business function that both federal governments and state governments require companies to carry certain types. Thus, being properly insured also helps you protect your company by protecting it from government fines and penalties.
Small Business Insurance Information
In the business world, there are many risks faced by company's every day. The best way that business owners can protect themselves from these perils is by carrying the right insurance coverage.
The The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.
Commercial insurance is particularly important for small business owners, as they stand to lose a lot more. Should a situation arise - a lawsuit, property damage, theft, etc. - small business owners could end up facing serious financial turmoil.
According to the SBA, having the right insurance plan in place can help you avoid major pitfalls. Your business insurance should offer coverage for all of your assets. It should also include liability and casual coverage.
Types Of Small Business Insurance
Choosing the right type of coverage is absolutely vital. You've got plenty of options. Some you'll need. Some you won't. You should know what's available. Once you look over your options you'll need to conduct a thorough risk assessment. As you evaluate each type of insurance, ask yourself:
- What type of business am I running?
- What are common risks associated with this industry?
- Does this type of insurance cover a situation that could feasibly arise during the normal course of doing business?
- Does my state require me to carry this type of insurance?
- Does my lender or do any of my investors require me to carry this type of policy?
A licensed insurance agent or broker in your state can help you determine what kinds of coverages are prudent for your business types. If you find one licensed to sell multiple policies from multiple companies (independent agents) that person can often help you get the best insurance rates, too. Following is some information on some of the most common small business insurance policies:
|Business Insurance Policy Type||What Is Covered?|
|General Liability Insurance||What is covered under commercial general liability insurance? It steps in to pay claims when you lose a lawsuit with an injured customer, employee, or vendor. The injury could be physical, or it could be a financial loss based on advertising practices.|
|Product Liability Insurance||What is covered under product liability insurance? I pays an injured party's settlement or lawsuit claim arising from a defective product. These are usually caused by design defects, manufacturing defects, or a failure to provide adequate warning or instructions as to how to safely use the product.|
|Commercial Property Insurance||What is covered under business property insurance? General liability policies don't cover damages to your business property. That's what commercial property insurance is for. It protects all of the physical parts of your business: your building, your inventory, and your equipment, giving you the funds you need to replace them in the event of a disaster. If you work from home, you might consider a Home Based Business Insurance policy instead.|
|Business Owners Policy (BOP)||What is covered under a business owners policy (BOP)? This is a policy designed for small, low-risk businesses. It simplifies the basic insurance purchase process by combining general liability policies with business income and commercial property insurance.|
|Commercial Auto Insurance||What is covered under business auto insurance? This type of insurance covers automobiles being used for business purposes. This could include a fleet of business-only vehicles or a single company car. In some cases it might cover your car or your employee's car while they're being used for business. These policies have much higher limits, ensuring you can cover your costs if one of these vehicles gets into an accident.|
|Commercial Umbrella Policies||What is covered under commercial umbrella insurance? This type of policy is a sort of "gap" insurance. It covers your liability in the event that a court verdict or settlement exceeds your general liability policy limits.|
|Professional Liability (Errors & Omissions)||What is covered under professional liability insurance? This type of business insurance is also known as malpractice oe E&O. It covers the damages that can arise from major mistakes, especially in high-stakes professions where mistakes can be devastating.|
|Surety Bond||What is covered under surety bonds? Bonding is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation).|
Who Needs General Liability Insurance? - Virtually every business. A single lawsuit or settlement could bankrupt your business five times over. You might also need this policy to win business. Many companies and government agencies won't do business with your company until you can produce proof that you've obtained one of these policies.
Business Insurance Required by Law
If you have any employees most states will require you to carry worker's compensation and unemployment insurance. Some states require you to insure yourself even if you are the only employee working in the business.
Your insurance agent can help you check applicable state laws so you can bring your business into compliance.
Other Types Of Small Business Insurance
There are dozens of other, more specialized forms of small business insurance capable of covering specific problems and risks. These forms of insurance include:
- Business Interruption Insurance
- Commercial Flood Insurance
- Contractor's Insurance
- Cyber Liability
- Data Breach
- Directors and Officers
- Employment Practices Liability
- Environmental or Pollution Liability
- Management Liability
- Sexual Misconduct Liability
Whether you need any or all of these policies will depend on the results of your risk assessment. For example, you probably don't need an environmental or pollution policy if you're running an IT company out of a leased office, but you would need data breach and cyber liability policies to fully protect your business.
Additional Resources For Small Business Insurance
Protect your company and employees with the right commercial insurance policies. Read informative articles on small business insurance coverages - and how they can help shield your company from legal liabilities.
- Small Business
- Business General Liability
- Business Liability
- Business Owners Policy (BOP)
- Certificate of Insurance
- Commercial Auto
- Commercial Umbrella
- Comprehensive General Liability
- Directors and Officers Liability
- Cyber Liability
- Employers Liability
- Employment Practices Liability
- General Liability
- Home Based Business
- Independent Contractor
- Liability Insurance Certificate
- Liability Insurance
- Professional Liability
- Workers Compensation Insurance
Your small business faces many potential disasters including: fire, floods, theft, equipment breakdown, lawsuits from clients or customers and current & former employees. Any many other risks you haven't even thought about.
A small business commercial insurance program should provide protection for both larger and smaller disasters. The obvious things like fire, flood and theft most business owners think about... but what if a hacker infects your computers with a virus - and files containing private customer information like credit card and Social Security numbers are stolen?
Who is going to pay to fix your customers credit rating etc...? Will your insurance pay for the cost? You need to know that.
Your commercial insurance program should cover events that can close down your company, or cause it to lose revenue. Anything less than that is not enough coverage. Commmercial insurance doesn't cover everything, and all policies have exclusions and limits.
You need a written plan that allows you to get your operations back up and running as quick as possible.