Coverage for Suits by Injured Employees
Employers liability coverage protects your firm against suits by employees for injuries sustained on the job. It is automatically included under Part Two of the standard NCCI workers compensation policy. Employers liability coverage is important. Without it, your business would have no protection against third-party lawsuits by injured employees.
In most states, you (the employer) must purchase a workers compensation policy that provides medical and other benefits to injured workers. In exchange for those benefits, injured workers give up the right to sue you for damages. That is, employees who accept workers compensation benefits for on-the-job injuries are prohibited from suing you for those injuries.
Suits Arising from Worker Injuries
While states laws generally bar workers from suing their employer for work-related injuries, the laws have some exceptions. Lawsuits may be filed by injured workers or their family members 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 that you were negligent and that your negligence caused 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. Non-occupational injuries and illnesses are not covered by workers compensation laws. Moreover, some illnesses acquired on the job may not be covered by a state's occupational disease 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 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.
Employers liability insurance covers the types of suits 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 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. Moreover, the employee's last exposure to the disease-causing conditions (such as asbestos fibers or silica dust) must occur during the policy period.
Here are some key exclusions that apply to employers liability coverage.
- Liability you assume under a contract Suppose you lease office space. Under the rental contract, you assume liability for any damages your landlord is obligated to pay to your employees for injuries they sustain on the job. An employee of yours is injured on the job and sues your landlord for negligence. You are obligated under the contract to pay any damages awarded to the worker. Because of the contractual liability exclusion, your employer's liability insurance will not cover those damages. However, the claim may be covered by the contractual liability coverage that is included in your general liability policy.
- Injury to a worker knowingly employed by you or an executive officer in violation of the law For example, you have 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.
- Punitive damages because of injury to an employee employed in violation of the law Your policy will not pay any punitive damages assessed against you because you have employed a worker illegally.
- Intentional injuries There is no coverage for injuries you have inflicted on an employee intentionally. For instance, you injure a worker with a baseball bat to punish him for being late to work. If the worker sues you for the injury, the suit will not be covered.
- Psychological injuries Your policy won't cover non-physical injuries like defamation, discrimination, humiliation and wrongful termination.
- 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. These individuals are covered for workplace injuries under various maritime laws.
Unlike workers compensation insurance, employers liability coverage is subject to limits. The limits are stated in the Information Page (declarations). There are three separate limits:
- Bodily Injury by Accident This is the most the insurer will pay for all injuries sustained by all employees injured in a single accident.
- Bodily Injury by Disease - Policy Limit This is the most the insurer will pay for occupational disease sustained by all employees during the policy period.
- Bodily Injury by Disease - Each Employee This is the most the insurer will pay for occupational disease sustained by any one worker.
The expenses your insurer incurs to defend you against an employer's liability suit are covered in addition to the limits. That is, attorneys fees, litigation expenses and other costs attributed to your defense will not reduce your limits.