Employer’s Liability = Protection from Lawsuits
Most employers are familiar with their worker’s compensation insurance, it is a mandatory form of coverage in New York when you have employees. But the policy is actually separated into two parts. Part One covers the statutory obligations the employer has to protect workers when they are injured on the job. And, Part Two known as Employer’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 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, don’t get Employer’s Liability confused with Employment Practices Liability Insurance – commonly referred to as EPLI. EPLI covers the business for employment-related lawsuits such as discrimination, wrongful termination, or harassment. Employer’s Liability focuses on employee’s work-related injuries or illnesses.
Part One of the worker’s comp policy is statutory and no fault or negligence needs to be shown. Part Two of the policy is negligence-based, so coverage is triggered by a lawsuit.
What do those lawsuits allege?
- Third Party “Action-Over” 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 party’s property.
- Consequential Injuries – These are lawsuits from family members that claim that as a result of the injured worker’s accident or injuries that they sustained some form of emotional trauma or bodily injury.
- Loss of Consortium – A lawsuit 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 employer’s product caused the worker’s injury.
We don’t see a lot of claims happen in Part Two of the Workers Compensation Policy, but that doesn’t mean they don’t occur. In New York, employer’s liability is automatically made part of the worker’s comp policy, but in most monopolistic states employer’s liability is not included, so separate coverage must be purchased. This is called “Stop-Gap” coverage, and for employers in New York with multiple state operations it’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. Many commercial umbrella policies do not provide excess liability protection over your employer’s liability coverage, especially if you have workers comp in the NY State Fund, or another insurer. While not a huge exposure, you should make every attempt to include employer’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 – let’s start a conversation!