The Difference Between Workers’ Compensation and Employer’s Liability
Today we continue our introductory series on Commercial Lines Insurance for personal lines agents, CSRs and underwriters.
Most insured’s purchase Workers’ Compensation (WC) policies because of the legal requirement of the state(s) have that they are operating in. But, what most insured’s don’t understand is the difference between WC and Employer’s Liability coverage, which is usually included as a separate coverage on their WC policy.
WC policies provide coverage for employees if they are injured while working, without regard to fault. The policies will pay for medical expenses as well as loss of income due to not being able to work. The policy declaration pages show “Statutory” for the limit, meaning that the carrier must pay whatever the legal requirement is in the respective state. In other words, the limit on a WC policy is mandated by each state and can vary depending on the type of injury. Here’s an example:
A waitress trips and falls while serving food and breaks her ankle. The cost of the medical expenses is $3,000 and the time she missed away from work caused her to lose $1,000 in income. The WC policy will provide coverage for $4,000 (the total medical expenses plus the total loss of income).
The other part of a WC policy is Employer’s Liability. This provides coverage for an employer in the event an employee does not feel the WC policy provided adequate coverage and that the employer was negligent. It is important for agents to read the policy language defining the specific triggers for employer’s liability coverage. Most policies will only respond to very specific instances in which the insured can be found liable to the employee or a related third party such as a spouse. Here’s an example of this coverage:
A construction worker feels that using a steel ladder will best help him complete his roofing job. However, the employer feels that using a wooden ladder is best and mandates that he use the wooden ladder. While working on the wooden ladder, it collapses and the employee is injured. He files a WC claim but does not feel it is adequately reimbursing him for his lost wages while he is unable to work. He files a claim against the employer claiming that they were negligent in not providing an adequate ladder for the job. The Employer’s Liability policy will provide coverage for this claim.
Note that the Employer’s Liability coverage lists a specific limit, unlike the WC policy which is statutory. In monopolistic states (where the WC coverage is required to be purchased from the state), the Employer’s Liability coverage can be found on the General Liability policy.
About Carly Burnham
Carly Burnham began her insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. She got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how she fell in love with the industry. She saw firsthand the good that insurance consumers experienced by having the proper protection. When Carly moved to Des Moines in 2010, she decided to commit to the industry, and she completed her CPCU in one year finishing it in 2012 and attending commencement in New Orleans. She completed her MBA at Iowa State University in 2014. During this time, she and Tony founded a Gen Y Associate Resource Group at Nationwide in Des Moines. After they had both left Nationwide, Tony recruited Carly to co-author and manage InsNerds.com. She has the difficult task of keeping his constant flow of crazy ideas focused and helping to flesh them out into useful articles. Carly enjoys sharing knowledge and ideas about the future of the industry and finds the website a good outlet for this passion. Carly is involved in the the CPCU Society Underwriting Interest Group. She also writes "Next Wave" a monthly column in the "Perspectives" section of Best's Review.
Carly Burnham began her insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. She got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how she fell in love with the industry. She saw firsthand the good that insurance consumers experienced by having the proper protection.
When Carly moved to Des Moines in 2010, she decided to commit to the industry, and she completed her CPCU in one year finishing it in 2012 and attending commencement in New Orleans. She completed her MBA at Iowa State University in 2014. During this time, she and Tony founded a Gen Y Associate Resource Group at Nationwide in Des Moines.
After they had both left Nationwide, Tony recruited Carly to co-author and manage InsNerds.com. She has the difficult task of keeping his constant flow of crazy ideas focused and helping to flesh them out into useful articles. Carly enjoys sharing knowledge and ideas about the future of the industry and finds the website a good outlet for this passion.
Carly is involved in the the CPCU Society Underwriting Interest Group. She also writes "Next Wave" a monthly column in the "Perspectives" section of Best's Review.
