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.
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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).
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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.
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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.