Highlights
- Regardless of size or industry, every business with employees needs employers’ liability insurance.
- EL insurance acts as a safety net, covering legal defense costs, settlements, and judgments that workers’ compensation alone doesn’t address.
- At WorkLogic HR, we help businesses identify blind spots in their insurance coverage and develop a safety program. Get a free HR consult today.
As your business grows, so do the risks and liabilities you are exposed to. Unexpected employee claims and legal battles can drain your financial resources. Fortunately, employers’ liability insurance can protect you against these risks.
Let’s unwrap the basics of this type of insurance policy and how it can minimize the impact of employee claims on your bottom line.
What is Employers’ Liability Insurance?
Employers’ liability insurance is a type of insurance policy that provides financial protection for businesses against claims made by employees who suffer work-related injuries or illnesses.
Regardless of your business’s size or industry, employers’ liability insurance is a must-have component of your risk management strategy. It’s generally offered as a part of a workers’ compensation policy (in fact, is often referred to as “Part Two”), though it’s important to address the differences between them.
In the event of a workplace accident or disease, workers’ comp covers medical expenses, lost wages, and rehabilitation for employees. Purchasing workers’ compensation insurance is a mandatory requirement for employers in all states in the U.S., except for Texas.
But beyond that, an employee can sue their employer for negligence, alleging they failed to provide safety equipment or violated a safety regulation. That’s where employers’ liability insurance comes into play, helping cover the legal defense costs, settlements, and judgments associated with such claims.
Why Your Business Needs Employers’ Liability Insurance
Accidents can happen at any time.
Imagine an employee slips and falls in your warehouse due to a spill that wasn’t cleaned up promptly. In this scenario, workers’ compensation would cover his medical bills, but what if he also decides to sue your business for negligence? Without employers’ liability insurance, you’d be facing serious legal costs, even if the claim is ultimately dismissed.
Defending against a lawsuit can be extremely expensive. Legal fees, court costs, and settlements or judgments can add up quickly without the appropriate coverage. Furthermore, violating state and federal safety regulations can also expose your business to fines and penalties.
By transferring the risk to an insurance provider, you can focus on running your operations without the worry that a single employee claim could jeopardize the future of your business. This peace of mind allows you to prioritize employee well-being and maintain a positive work environment, knowing that you have a safety net in place in case of unexpected challenges.
What Does Employers’ Liability Insurance Cover?
Employers’ liability insurance covers the costs your business may face if an employee makes a claim against you for a work-related injury or illness and alleges that your negligence caused it.
This typically includes:
- Legal defense costs — The costs for defending your business in court, including lawyers’ fees, court filing fees, and expert witness fees.
- Compensation payments — If the employee’s claim is considered successful, or if you settle, the employee will be compensated. Employers’ liability insurance covers payments for pain and suffering, lost wages (past and future), medical expenses not covered by workers’ comp and more.
- Third-party lawsuits — In some cases, an employee’s injury might lead to a lawsuit against your business by a third party (for example, the manufacturer of a faulty piece of equipment involved in the accident). Employers’ liability insurance may extend to cover these types of lawsuits.
- Loss of consortium — If an employee’s injury is severe enough to impact their spouse’s quality of life, the spouse may file a “loss of consortium” lawsuit. Some employers’ liability policies cover these claims.
- Consequential bodily injury — These are situations where a non-employee is injured as a result of an employee’s work-related injury. For example, if an employee is injured and needs care from a family member who then suffers an injury while providing that care.
- Dual-capacity lawsuits — In rare cases, an employee might sue their employer in a dual capacity (for instance, if the employer is also the manufacturer of a product that caused the injury). Some policies may cover these specific situations.
Exclusions and Limitations
There are some specific situations in which employers’ liability insurance won’t cover your business:
- Intentional or willful misconduct by the employer — When an employee’s injury or illness is found to be caused by the employer’s deliberate disregard for safety regulations or intentionally harmful actions.
- Injuries or illnesses resulting from a violation of law or non-compliance with statutory requirements — For example, if an employee is injured while operating machinery without the required licenses or certifications, the insurance may not cover the claim.
Consulting with an HR partner can provide valuable insights as you review your insurance policy, helping you identify coverage gaps and address specific risks.
How to Obtain Employers’ Liability Insurance for Your Business
Choosing the right employers’ liability insurance for your business will depend on the type of industry, the nature of the work, and the number of employees you have.
Consulting with legal experts can help you understand the specific requirements of your business and the specific regulations that apply.
Typically, this involves conducting a risk assessment to evaluate the kind of business activities, the work environment, and the potential hazards your employees may face. Industries such as construction, manufacturing, and healthcare tend to have higher risks because of the physical nature of the work and exposure to heavy machinery, chemicals, or infectious diseases.
Next, you’ll need to consider the size of your workforce and the types of roles your employees hold. Additionally, factor in your business location and any unique regional or state-specific regulations that may impact your insurance needs.
Keep in mind that your insurance needs may evolve as your business grows, expands into new markets, or introduces new products or services. It’s always good practice to review and update your insurance policy to ensure it’s still aligned with your risks and exposures.
Getting Started with Worklogic HR
While workers’ compensation provides essential (and, in most states, mandatory) coverage, employers’ liability insurance goes further, protecting you from the financial risks of employee lawsuits and providing a solid safety net, no matter the size of your business.
Ready to protect your business from the risks and liabilities associated with workplace injuries or illnesses? WorkLogic HR is here to help. Our team of experts can assess your insurance coverage to identify any blind spots that may leave you vulnerable, and help you develop an injury and illness prevention program.
As your HR business partner, we can handle risk and compliance for you, ensuring your business stays safe and fully compliant. Contact us today to schedule a free consultation and explore our HR solutions.
