What Does Workers Comp Cover?

what does workers comp coverWhat is Workers’ Compensation?  

And, what does workers comp cover?   Workers compensation, or workman’s compensation or workers comp, protects a business from claims which arise from employees who are injured in on-the-job accidents or become ill from work-related causes. 

There are four major headings or categories of what workers comp covers: 

  • Medical Expenses 

Workers comp will pay for the medical-related bills for work-related injuries and illness.  This includes emergency transportation to a medical facility, emergency room visits, surgical procedures, hospital stays, prescriptions, and other medical expenses.  Workers comp pay or reimburse expenses as per a schedule set by the state where the injured worker is treated.  Rehabilitation and ongoing care needed to restore an injured worker’s health are also covered. 


  • Lost Wages 

We talk more about what we call lost time in other videos, but when a worker is injured and is unable to return to work for a period of time, their wages are covered.  Workers’ compensation does not pay the full amount of wages but instead pays approximately two-thirds of lost wages, depending on your state.   Why two-thirds?  That’s because worker’s comp payments are tax-free in most cases, and the system isn’t designed to make injured workers better off than they were before an accident or illness.  It’s a moral hazard and wouldn’t encourage workers to get back to work if paid more for recovering than working. 


  • Fatal Injuries and Death Benefits 

If a worker suffers a fatal work-related injury, workers compensation will also pay a small death benefit to cover funeral expenses and provide survivor benefits.  This amount changes from state to state. 


  • Lawsuits Arising from Worker Injuries 

Part 2 of a workers comp policy doesn’t get discussed very often – it’s known as employer’s liability insurance. Its function is to provide liability protection from lawsuits that can arise from a work injury due to an employer’s negligence. 

Claims of negligence are in addition to the part 1 benefits of a policy – meaning the injured worker still gets medical bills and lost wages covered. Still, when negligence is involved, and the worker or their beneficiaries feels that the employee should sue the employer, this section of the policy covers the employer. 

You may be asking why doesn’t the employer’s general liability policy cover this – and that’s because the GL or general liability policy strictly excludes claims arising from worker injuries. 

In the past, we didn’t see many claims filed under part 2 of the worker’s comp policy, but in recent years this is occurring more frequently, especially in New York, where Third-Party Action Over lawsuits is somewhat common.  “Action-over” lawsuits happen when an injured worker elects to sue a general contractor or commercial property owner where the injury occurs for their “grave injuries.”  Because the injured worker’s employer – a sub-contractor has agreed to indemnify the general contractor, the owner of the project, and others for any claims which occur, those third parties turn around and hand the lawsuit back to the injured worker’s employer. 

Other employer liability lawsuits can involve loss of consortium, consequential bodily injury, and dual capacity lawsuits. 

A final point regarding employers liability, if you have employees located in what we call monopolistic states of North Dakota, Ohio, Washington, or Wyoming, where the worker’s comp system is run by the state and not commercial insurance, Part 2 of coverage is not included in those states.  So you’ll need to purchase Stop-gap coverage. 

 Have other questions regarding workers’ compensation or employer’s liability?  Why not contact me so we can start a conversation. 

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