What Does Employers’ Liability Insurance Cover?
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Updated date : 19 January 2021
An employers' liability insurance policy provides coverage to employers from financial loss if a worker encounters job-related illness or injury. Generally, this insurance plan covers compensation and legal costs when an employee sues his/her employer for work-related injury or illness. The amount of compensation covers things like loss of income or medical costs.
In this way, employers' liability insurance provides the following coverage:
Employers’ Liability Insurance Coverage:
- Third-Party Claims: Employers' liability insurance protects against third-party claims that may incur because of third-party property damage or bodily injury. If an employee sues a third-party for a work-related injury, the third-party can try to recoup the losses by suing the business of the employee. In such a case, the employers' liability insurance covers the legal expenses as well.
- Loss of Consortium: If the family member of an employee faces a loss because of the injury of the employee or death, they can file a loss of consortium claim against the employer.
- Dual Capacity: Same as a third-party claim, an employee can file a claim when he/she is injured by a product that is manufactured by the employer. For example, if an employee is injured by a product that is manufactured by his/her employer, then he/she can file a claim against his/her employer as a manufacturer and employer. The employers’ liability insurance provides financial protection in such cases as well.
- Consequential Bodily Injury: This is a type of lawsuit filed by the spouse of an injured employee claiming injury or illness to the spouse due to the initial injury of the employee. For example, if the spouse claims that his/her heart attack or high blood pressure is because of stress caused due to original injury at the workplace.
- False and Frivolous Claims: The employers should also understand that false claims may occur. This can sometimes be even from employees who got compensation for their lost wages or medical expenses. An employers’ liability insurance policy ensures that the employees do not take advantage of employers and other parties.
Who Do Require Employers’ Liability Insurance?
Any business or employer that requires protection from financial loss because of a work-related illness or injury needs employers' liability insurance. Even if the company has strict safety protocols at its workplace, accidents can occur. Sometimes even a single injury at the workplace can impact the entire business if the employer is not insured adequately.
How Do I Know If I Have Sufficient Employers’ Liability Coverage?
There is no limit on how much an employers' liability insurance policy can cover for an injury or illness, however, it does have some limits. It depends on the employer to know how much cover is sufficient for its employees. The businesses that are at high risk of employees’ lawsuits can consider can opt for wider coverage so that they can get coverage for almost all.
Limitations of Employers’ Liability Insurance
Since an employers’ liability insurance provides coverage against claims of employees, but if an employer deliberately aggravates the work-related illness or injury of an employee, then this liability insurance will not provide coverage for the financial obligations of the employers to the employee and in that case, the employer has to pay to the employee if the employee wins his/her case in the court.
Employer’s liability insurance also puts limitations on what has to be paid per employee, per illness, and injury.
The Final Words!
Even with adequate coverage provided by employers' liability insurance, claims may become costly and complicated for employers especially when it comes to lawsuits. The cost to defend against these lawsuits can be a big financial loss.
This is why many companies choose to have employers' liability insurance to help to get the costs of defending the company from different types of lawsuits. A claim may be legitimate or may not be, but even then, there is a business that cannot take that level of risk.
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