Employers' Liability

Overview

Employers' Liability is Part Two of a standard Workers' Compensation and Employers' Liability insurance policy. While Part One (Workers' Compensation) pays statutory benefits to injured employees regardless of fault, Part Two (Employers' Liability) covers the employer when an employee sues for damages beyond those statutory benefits. This coverage is essential because workers' compensation's exclusive remedy doctrine has exceptions that expose employers to lawsuits.

How It Works

The workers' compensation system is designed as a no-fault arrangement: employees receive guaranteed benefits for work-related injuries, and in exchange, they generally cannot sue their employer. However, several legal theories allow employees to step outside this "exclusive remedy" and pursue tort claims against their employer:

• Dual capacity doctrine: When the employer acts in a capacity other than employer (e.g., as a product manufacturer whose product injures the employee).
• Third-party over actions: A third party sued by the injured employee (such as a property owner) seeks contribution or indemnity from the employer.
• Intentional tort: The employee alleges the employer intentionally caused the injury.
• Loss of consortium: The employee's spouse sues for loss of companionship.
• Consequential bodily injury: A family member suffers harm as a consequence of the employee's work-related injury.

Employers' Liability coverage has three standard limits shown on the ACORD certificate:

• Each Accident: The maximum for a single workplace accident (e.g., $1,000,000).
• Disease — Policy Limit: The aggregate maximum for all disease claims in a policy period (e.g., $1,000,000).
• Disease — Each Employee: The maximum per employee for disease claims (e.g., $1,000,000).

Compliance Relevance

Employers' Liability limits are a standard COI compliance requirement:

• Minimum limits: Contracts commonly require $1,000,000 for each of the three Employers' Liability limits. Some high-risk industries require higher amounts.
• Certificate review: The three limits appear in the Workers' Compensation section of the ACORD 25. All three must meet contractual minimums.
• Monopolistic state consideration: In states with monopolistic workers' compensation funds (Ohio, North Dakota, Washington, Wyoming), Employers' Liability coverage is not included in the state fund policy. Employers in these states must purchase a separate Employers' Liability policy, often called Stop Gap coverage.
• Umbrella coordination: Umbrella liability policies typically sit excess over Employers' Liability limits, providing additional protection for large claims.

Example

A construction worker is injured on a commercial building site. They receive workers' compensation benefits from their employer's policy (Part One). The building owner, sued by the worker for unsafe conditions, files a third-party indemnity claim against the contractor (the worker's employer). The contractor's Employers' Liability coverage (Part Two) responds to defend and indemnify the contractor against this cross-claim, up to the $1,000,000 Each Accident limit.