Most employers are familiar with their workers compensation insurance, it is a mandatory form of coverage in New York when you have employees.Â But the policy is actually separated into two parts.Â Part One covers the statutory obligations and employer has to protect workers when they are injured on the job, and Part Two known as Employerâ€™s Liability, covers the business for legal liabilities arising from employees work related injury or illnesses not covered in Part One of the policy.
Employer’s Liability = Protection from Lawsuits
Employerâ€™s Liability responds to worker related lawsuits, where the worker, their family or possibly a third party does not feel that Part One of the policy is a sufficient remedy to the claim, so they file a lawsuit.
Now, donâ€™t get Employerâ€™s Liability confused with Employment Practices Liability Insurance – commonly referred to as EPLI.Â EPLI covers the business for employment related lawsuits such as discrimination, wrongful termination, or harassment – Employerâ€™s Liability focuses on employeeâ€™s work related injuries or illnesses.Â
Where Part One of the workers comp policy is statutory and no fault needs to be shown, Part Two is negligence based, meaning that coverage is triggered by a lawsuit.
What do those lawsuits allege?
- Third Party â€śAction-Overâ€ť Lawsuits – These claims come from third parties who will sue you after your employee files a lawsuit against them for injuries they may have sustained on the third partyâ€™s property.
- Consequential Injuries – These are lawsuits from family members that claim that as a result of the injured workers accident or injuries that they sustained some from of emotional trauma or bodily injury.
- Loss of Consortium – This is a lawsuit which is filed by a spouse who claims that the injured worker is no longer able to engage in marital relations due to the work related injury.
- Dual Capacity Suits – These are claims brought against employers who are typically manufacturers and the injured worker claims that the employerâ€™s product caused the workerâ€™s injury.
We donâ€™t see a lot of claims happen in Part Two of the Workers Compensation Policy, but that doesnâ€™t mean they donâ€™t occur.Â In New York, employerâ€™s liability is automatically made part of the workers comp policy, but in most monopolistic states employerâ€™s liability is not included, and separate coverage must be purchased.Â This is called â€śStop-Gapâ€ť coverage, and for employers in New York with multiple state operations itâ€™s important to purchase stop-gap for those operations in the monopolistic states (jurisdictions) of: North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the U.S. Virgin Islands.
Check your Umbrella Policy!
One final note.Â Many commercial umbrella policies do not provide excess liability protection over your employerâ€™s liability coverage, especially if you have workers comp in the NY State Fund, or another insurer.Â While not a huge exposure, you should make every attempt to include employerâ€™s liability as part of the schedule of underlying coverage in our umbrella policy.
For more information on workers comp, or business insurance in general, please give us a call or drop us an email – letâ€™s start a conversation!