An employer’s liability insurance policy protects your business when an employee sues over a work injury or illness. It's an important policy, because nearly one in five small businesses will face an employee lawsuit.
For employees, their workers’ compensation benefits cover medical bills arising from a work-related employee injury or illness. It can also offset some of an injured employee’s lost wages if they’re unable to work for a while.
For employers, the main benefit to workers’ comp is the protection from legal claims that employer’s liability insurance or EL insurance covers. If an employee files a work-related injury lawsuit against your business, this coverage can help pay for your legal defense.
Consider these examples of employer’s liability claims:
An employee sues a third-party over a workplace injury, and the third-party turns around and sues the employer.
An employee’s family members seek punitive damages from the employer if their relative has a debilitating illness, suffered a serious bodily injury, or died in a work-related accident.
An employee is injured from using one of the employer’s products, then sues the company in its capacity as both an employer and a manufacturer.
This could be filed by a non-employee who is impacted by an employee’s work-related injury or illness, such as a family member who faces health problems from caring for an injured worker.
Employer’s liability is the legal responsibility of an employer to pay damages to an employee who suffers a work-related injury or illness, which can often result in an expensive lawsuit. Your employer’s liability insurance can help offset those legal costs, as well as any settlement.
Your employer’s liability insurance coverage is included in most workers’ compensation insurance policies, although it's excluded from state-run programs. Workers’ comp is required in almost every state for employers with one or more employees.
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Employer’s liability insurance is included in most workers’ compensation policies, so the coverages are related but not the same.
Workers’ compensation insurance covers the medical expenses for an employee’s work-related injuries and illnesses, along with some of their lost wages.
Employer’s liability insures a business owner against lawsuits over an employee injury or illness.
Learn more about workers' compensation and employer's liability coverage limits.
Sole proprietors who have no employees typically aren’t required to carry employer’s liability coverage. They may have to carry workers’ comp insurance if they work in a profession with higher risk, such as construction and building trades.
If you’re self-employed or an independent contractor, you might need a workers’ comp policy to fulfill the terms of a contract.
Workers’ compensation can also come in handy if you have a work-related injury or occupational disease and are unable to work for a while. Your regular health insurance is unlikely to cover you for a work-related mishap.
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Small business owners typically choose employer’s liability limits of $100,00 per accident, $500,000 per policy, and $100,000 per employee. Limit increases can typically be purchased for a small increase in premium.
These liability limits are completely separate from the medical and wage benefits offered by your workers' comp insurance, and this option might not be available in monopolistic states.
In most states, your employer’s liability insurance is included in the workers’ compensation coverage you purchase from a private company.
In the monopolistic states of North Dakota, Ohio, Washington, and Wyoming, their workers’ compensation laws require employers to buy workers' comp insurance from a state fund. In 10 other states, employers have the option of buying their workers’ comp coverage from a state fund or the private market.
State-operated workers’ comp funds don’t include employer’s liability coverage. If you buy workers’ comp through a state fund you would need to buy a separate employer’s liability policy from an insurance company, to be protected against legal actions by your employees over a workplace injury or illness.
You might buy employer’s liability coverage as a separate policy, known as stop gap coverage, or as an add-on endorsement to your general liability insurance.
If you’re in need of employer’s liability or workers’ compensation insurance, you can buy coverage from Insureon and get your certificate of insurance (COI), typically in less than 24 hours.
