- What does employers’ liability insurance cover?
- What does employers’ liability insurance not cover?
- How does an employer’s liability insurance work?
- Employer liability insurance vs Employment practices liability insurance
- How to buy employer liability insurance?
- Final thoughts
- Frequently asked questions
What does employers’ liability insurance cover?
The employer’s liability insurance covers the legal fees for the following lawsuits:
- Dual capacity lawsuits. Refers to the legal action that allows an employee to sue their employer if they have a second legal relationship with the worker. For instance, if you are an electric appliance manufacturer and your employee gets injured using your electric appliance, they can sue you as both manufacturer and employer.
- Third-party lawsuits. Imagine an employee gets hurt at work because of a piece of equipment. Instead of suing their direct employer, the injured worker might decide to sue the company that made the equipment. Now, the equipment manufacturer, feeling it's not entirely their fault, might turn around and file a lawsuit against the employer of the injured worker.
- Loss of consortium lawsuits. If the employee passes away or becomes disabled from a work-related incident and the employee’s family member files a lawsuit seeking compensation for the death.
- Consequential bodily injury lawsuits. If a non-employee suffers physical injury or illness due to an employee’s injury, such as a spouse who gets sick from taking care of the injured employee.
What does employers’ liability insurance not cover?
Employers liability insurance doesn’t cover claims related to:
- Discrimination
- Harassment
- Retaliation
- Violation of employee’s rights
- Wrongful termination
- Breach of employment contract
- Mismanagement of employee benefit plans
How does an employer’s liability insurance work?
Employers' liability insurance is a type of insurance that protects employers from liabilities and expenses arising from injuries or illnesses suffered by employees during the course of their employment.
It provides coverage for legal costs, compensation payments, and other expenses incurred if an employee sues the employer for injuries or illnesses sustained while working. In many jurisdictions, employers' liability insurance is a legal requirement for businesses that have employees. The specific requirements vary depending on the country and the nature of the business.
However, employers can reduce their exposure to liability claims by implementing effective risk management practices, such as providing a safe working environment, ensuring employees receive proper training, and following relevant health and safety regulations.
Employer liability insurance vs Employment practices liability insurance
| Employer liability insurance (ELI) | Employment practices liability insurance (EPLI) |
|---|---|
| Helps businesses pay for lawsuits over employee injuries | Helps businesses pay for employment practices-related lawsuits |
| It covers bodily injury, property damage, and personal and advertising injury | It covers coverage against claims for harassment, wrongful termination, breach of employment contract, and more. |
| Bodily injury includes - injury, sickness, disease or death Personal and advertising injuries include - libel, slander, any defamatory material, or any violation of an individual’s privacy. | It covers legal costs whether you win the case or not. However, it does not cover punitive damages civil or criminal fines. |
Both these insurances serve different purposes, and some businesses may find it beneficial to have both for comprehensive coverage.
How to buy employer liability insurance?
If you already have workers compensation coverage, check if it includes ELI, as in most states, these two coverages are combined. If not, buying an employer's liability insurance involves the following steps.
- Evaluate your business size, industry, and potential risks. Consider the number of employees, the nature of their work, and any specific hazards in your industry.
- Understande the legal requirements for employer's liability insurance in your state. Some states mandate a minimum coverage amount, and compliance is crucial to avoid penalties.
- Reach out to insurance companies that offer employers liability coverage. It’s best to obtain and compare quotes from multiple insurers to save money on premiums.
- Work with an experienced insurance agent to assess your needs, gather explanations on policy details, and find the best coverage for your business.
- Decide on appropriate coverage limits based on your business needs and potential. Also, look at any additional coverages or industry-specific policies.
- Review the insurance policy, completing applications, submitting required documents, and paying the premium.
Final thoughts
Employers' liability insurance (ELI) is important for businesses, as it protects them against claims from employees' work-related injuries or illnesses. It covers legal expenses and compensation for workplace-related claims, providing a safety net for employers. For businesses seeking comprehensive coverage, having both ELI and EPLI insurance may prove beneficial.
Frequently asked questions
Do I need employer liability insurance?
Employer liability insurance is important for businesses. It helps protect you if employees get injured or become ill while working. This insurance covers legal costs and compensation, reducing the financial impact on your business if there's a workplace injury or illness claim.
How much employer’s liability insurance do I need?
The amount of employer's liability insurance you need depends on factors like your business size, industry, and risks. You can discuss with your insurance professional to determine the appropriate coverage for your specific situation.
Sources:
- Insurance Information Institute. “Employers practice liability insurance.” Accessed February 2024.
- Insurance Information Institute. “Insuring your business.” Accessed February 2024.
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