Employers liability coverage protects you against suits filed by injured workers. Why would you need this coverage if you've purchased workers compensation insurance?

Most state workers compensation plans are intended to serve as injured employees’ exclusive remedy (sole source of compensation) for work-related injuries. You (the employer) purchase a workers compensation policy that provides medical and other benefits to the worker on a no-fault basis.

In exchange for those benefits, the worker gives up the right to sue you for damages. Injured employees who have accepted workers compensation benefits from you are typically barred from filing lawsuits against you.

Yet, even if you have purchased workers compensation insurance, you may still be subject to lawsuits. Suits may be filed by employees themselves or by someone else, such as a worker's spouse. Employers liability coverage is designed to protect you against such suits. This coverage is afforded under Part Two of the standard NCCI workers compensation (WC) policy.

Suits Arising from Worker Injuries

An on-the-job injury to one of your employees can lead to a lawsuit against you under the following circumstances:

• The injured employee has rejected WC benefits. Some states allow workers to reject WC benefits and sue you instead. To collect damages, the worker must prove you were negligent and that your negligence led to his injury.
• The worker is not covered by your state WC law. Workers compensation laws typically exclude workers engaged in certain types of employment. For instance, many laws exclude agricultural and domestic workers. If you employ a worker who is not covered by the law, and he or she is injured on the job, the worker may sue you for damages.

• The worker sustains an injury or illness not covered by the WC law. For example, suppose a worker attempts to collect WC benefits for rheumatoid arthritis he claims he contracted from exposure to chemicals at your workplace. He is denied WC benefits on the basis that arthritis is not an occupational disease. The worker then files a lawsuit against you seeking damages for his disease.
• The injured worker sues a third party, who then sues you. For instance, suppose you own a plumbing company that has been hired by a general contractor to replace pipes in a building. Jim, one of your employees, injures his back at the job site. Jim files a workers compensation claim and collects benefits from your WC insurer. Jim then sues the general contractor, claiming that the it failed to maintain a safe workplace. The GC settles the claim with Jim. It then attempts to recoup the amount it has paid to Jim by suing you for damages. This type of claim is called a third-party-over suit.
• The injured worker’s spouse sues you for loss of consortium. Suppose that Jim, in the previous example, sustains nerve damage due to his back injury. The nerve damage causes impotence. Jim’s wife, Jane, sues you for loss of consortium (marital relations).
• A family member of the injured worker sues you for consequential injury. In the previous example, suppose that Jane sues you not only for loss of consortium but also for a consequential injury. She claims that stress over Jim’s back injury has caused her to develop migraine headaches. She demands that you pay for her treatment.
• The injured worker sues you in a capacity other than as an employer. Suppose your company manufactures hand drying machines like those found in public restrooms. Jill, one of your employees, is in the restroom at your workplace when she burns her hand on a drying machine made by your firm. Jill files a WC claim and collects benefits from your insurer. She also sues you in the capacity as a manufacturer, filing a product liability suit against your firm. (Because the suit arose from an injury to an employee, it is not covered under your general liability policy.)

Part Two of your workers compensation policy covers the types of claims described above. For coverage to apply, you must be legally liable for the employee’s injury or occupational disease. Also, the injury must arise out of the worker’s employment and must occur during the policy period of your workers compensation policy. If the worker has sustained an occupational injury, the injury must be caused or aggravated by the conditions of your employment. Also, the employee's last exposure to the disease-causing conditions (such as asbestos fibers or silica dust) must occur during the policy period.

Exclusions

Employers liability coverage contains a number of exclusions. Here are the major ones:

• Liability you assume under a contract. Suppose you rent office space. The rental contract you signed makes you responsible for any damages your landlord is obligated to pay to your employees should they sue your landlord for injuries sustained on the job. If an employee of yours is subsequently injured on the job and sues your landlord for negligence, you must pay any damages awarded to the worker. Because of the exclusion for liability assumed under a contract, your employers liability insurer will not cover those damages. However, the claim may be covered by the contractual liability portion of your general liability policy.
• Injury to a worker knowingly employed in violation of the law Suppose that you (or an executive officer) has employed a 14-year-old worker, even though you know the law requires workers to be at least 16. If the worker is injured and sues you for damages, the claim will not be covered.
• Intentional injuries There is no coverage for injuries you have inflicted on an employee intentionally. For instance, you want to punish a worker for being late to work. Thus, you strike him with a baseball bat, injuring him intentionally.
• Psychological injuries Excludes non-physical injuries like defamation, discrimination, humiliation and termination of employment.
• Injury to any employee outside the U.S. or Canada There is no coverage for employees who are injured outside the U.S. or Canada except for an American or Canadian citizen who is temporarily outside these locations (while on a business trip, for instance).
• Injuries to individuals covered under federal laws Workers covered under U.S. laws like the Longshore and Harbor Workers Compensation Act, the Defense Base Act, and the Federal Employers Liability Act are excluded.
• Masters or crew members No coverage is afforded for injury to any master or crew member of any vessel as these individuals are covered under various maritime laws.

Limits

In contract to workers compensation coverage, employers liability coverage is subject to limits. These are stated in the Information Page (declarations). Separate limits apply to injuries caused by accidents and to occupational disease. Bodily Injury by Accident is the most the insurer will pay for all injuries sustained by all employees injured in a single accident. Bodily Injury by Disease is subject to both an "each employee" limit and an "policy" (aggregate) limit.

Defense Costs

The expenses your insurer incurs to defend you against an employers liability suit are covered in addition to the limits. In other words, attorneys fees, litigation expenses and other costs attributed to your defense will not reduce your limits.