Employer’s liability
Also called Employers liability insurance or stop gap coverage
Definition
Employer’s liability insurance helps pay legal costs and damages when an employee, or their family, sues your business over a work-related injury or illness.
How it works
Workers’ comp pays the benefits your state’s law sets for work injuries: medical care and part of lost wages. In many cases those benefits are an employee’s main remedy, but some lawsuits over work injuries still happen. Employer’s liability is the coverage for those suits. Depending on state law, it can help with claims like:
- a spouse or family member suing for loss of companionship after a serious injury
- a lawsuit by an employee in a situation where state law lets them sue their employer directly
- a “third-party-over” claim, where an injured worker sues another company, such as an equipment maker, and that company sues you
Employer’s liability is usually included as part of a standard workers’ comp policy. Unlike the state benefits, it has limits you choose, often shown as three figures: a limit for each accident, a limit per employee for illness, and a total limit for illness claims.
Where it works differently
NCCI identifies four states, North Dakota, Ohio, Washington and Wyoming, as monopolistic states that administer their own workers’ comp plans and rates. Employers in those states may need to arrange employer’s liability separately, sometimes called stop gap coverage. Rules vary by state, so check with your state’s workers’ compensation agency.