Most states in the U.S. require employers to carry workers’ compensation insurance. This “no-fault” insurance guarantees compensation for medical expenses and lost wages to employees who are injured on the job. The goal of requiring the coverage is to avoid lengthy and costly litigation. Under workers’ compensation laws, the employee agrees not to sue the employer for negligence in exchange for quick resolution and payment of the claim. However, under certain circumstances, the employer may still have some legal exposure. That’s where employer liability insurance comes in.
What Does Employer Liability Insurance Cover?
Generally, a worker can bring legal action against his employer for a workplace injury only in very limited circumstances, such as when an OSHA violation has occurred. Under these circumstances, the employee can collect workers compensation benefits and sue the employer for additional damages. According to OSHA, these damages may include payment of all medical bills, out-of-pocket expenses, total lost wages, and an award for pain and suffering. In cases of serious and willful negligence, the court may award punitive damages as well.
Employer liability insurance may also cover other third party legal claims. These include:
Third party over actions
If an employee is injured on the job due to an equipment malfunction, they can bring a product liability lawsuit against the manufacturer. And if that suit results in payment of damages, the manufacturer can, in turn, sue the person’s employer for contributory negligence if there’s evidence to that effect. Say, for example, your employee inhales toxic fumes because the respirator you supplied him failed. The employee then sues the product manufacturer for damages and wins. If the product manufacturer can prove that your negligence caused the equipment to fail, it could recover all or part of its damages from you.
If a product made by the employer causes an on-the-job injury, the injured employee can file a product liability lawsuit against the employer in addition to a workers compensation claim.
Loss of consortium
If an on-the-job injury causes an employee to lose the ability to engage in sexual relations, the employee’s spouse may file this type of lawsuit against your firm.
Consequential bodily injury
Consequential bodily injury is an injury to a third party that’s a direct result of an employee’s on-the-job injury. For example, let’s say an employee sustains a severe injury on a job site and can no longer work. His spouse must take on all the responsibilities of running the household. She also has to get a part-time job to replace the income they’ve lost. Physically and mentally exhausted, she develops major depression, high blood pressure and insomnia. In this case, she could sue your company for the cost of her medical care.
Do You Need to Purchase Employer Liability Insurance?
In most U.S. states, workers compensation insurance includes employer liability insurance. However, if you do business in a state that requires you to buy worker’s compensation through a state fund, you may need to purchase this coverage as a separate endorsement to your general liability insurance policy. At present, these “monopolistic fund states” include North Dakota, Ohio, Washington and Wyoming.
Buying insurance is complex. And even seasoned business owners may not know how much and what kinds of coverage they require. That’s why you need an experienced professional to help you build an insurance program that meets your exact needs. Don’t leave your financial stability to chance. Give us a call and set up an appointment for your insurance review today. Or reach out to us online and we’ll get back to you right away.