employers liability coverage (EL)
Employers liability (EL) coverage is provided by part 2 of the workers compensation policy. It provides coverage to the insured (employer) for liability to employees for work-related bodily injury or disease, other than liability imposed on the insured by a workers compensation law.
Understanding Employers Liability Coverage
Employers Liability Coverage (EL) and Workers Compensation are two fundamental components of workplace injury and illness protection, yet they serve distinct purposes. Workers Compensation provides statutorily mandated benefits to employees who suffer work-related injuries or illnesses, covering medical expenses, rehabilitation costs, and lost wages. In contrast, Employers Liability Coverage provides protection to the employer against lawsuits filed by employees who, due to work-related injuries or diseases, seek compensation beyond the benefits provided by Workers Compensation. This coverage is crucial in jurisdictions where Workers Compensation does not fully prohibit employee lawsuits for damages.Note that for policy coverage to be triggered, all five policy conditions must be met. In addition, there are fourteen policy exclusions. If any one of these is applicable, there is no coverage under the employers liability policy.
Employers Liability Coverage specifically addresses the legal liability of employers arising from employee claims beyond the scope of Workers Compensation. Some of the types of claims covered include:
- Third-Party Over Actions:Third-party over actions involve situations where an employee is injured on the job, and a third party is deemed responsible. The employee may sue the third party, who then seeks to hold the employer responsible for the injury .
- Consequential Bodily Injury:Consequential bodily injury covers bodily injury to a family member of the employee that is a consequence of the employee's work-related injury.
- Dual-Capacity Suits:Dual-capacity suits occur when an employee sues the employer in a capacity other than as an employer, such as a manufacturer of a product that caused an injury.
- Care and Loss of Services: Compensation for the care and loss of services of a family member due to the employee's work-related injury.
Importance of Employers Liability Coverage
While workers compensation insurance serves to mitigate the employer's liability by providing statutory benefits to injured workers, it doesn't entirely eliminate the possibility of legal action. Employees may seek additional damages under certain circumstances, such as claims of negligence. Employers liability coverage steps in to protect the business's financial interests, covering defense costs, settlements, or judgments arising from such lawsuits.
The financial implications of facing an employee lawsuit can be significant. Beyond the immediate legal costs, settlements, or judgments, there's the potential for reputational damage which can indirectly impact a business's financial health. Employers liability coverage may help ensure that businesses can withstand the economic fallout of legal battles with employees over work-related injuries or diseases. This coverage is particularly vital for small and medium-sized enterprises, where a single lawsuit can have a disproportionate impact on the firms' financial stability.
FAQs
Q: What is employers liability coverage?
A: employers liability coverage is part of the workers compensation policy that provides protection to employers against legal liability for damages arising from work-related injuries or diseases that do not fall in the scope of workers compensation law.
Q: Why do employers need employers liability coverage?
A: Employers need this coverage to protect themselves against lawsuits filed by employees for work-related injuries or illnesses that seek compensation for benefits beyond the scope of workers compensation insurance.
Q: How does employers liability differ from workers compensation coverage?
A: While workers compensation insurance provides statutory benefits to employees for work-related injuries or illnesses, employers liability coverage protects the employer against claims that are outside the scope of the workers compensation act. Workers compensation insurance covers medical expenses, lost wages, and rehabilitation costs, whereas employers liability coverage protects against legal fees, settlements, or judgments arising from employee lawsuits when the employee's claim is covered by employers liability.
Q: Is employers liability coverage mandatory?
A: The requirement for employers liability coverage varies by jurisdiction. Note that in most jurisdictions, except those that are monopolistic, workers compensation and employers liability are bundled together in one policy with the employer's umbrella liability insurance (if purchased) sitting excess of the employers liability portion of the workers compensation policy when the employer's underlying employers liability limits are sufficient.
Q: How can employers obtain employers liability coverage?
A: Employers can obtain this coverage by purchasing a workers compensation policy that includes employers liability coverage. Additionally, stand-alone employers liability policies and employers liability endorsements are available in the marketplace. These products are mostly used in jurisdictions with monopolistic workers compensation systems since these systems do not offer employers liability insurance in addition to workers compensation insurance.
