What is employer’s liability on a worker’s comp policy?

An employer’s liability for injuries to employees is typically defined by the Workers’ Compensation Act of your jurisdiction. This act usually requires employers to carry a workers’ compensation insurance policy, purchased either privately or through the state. Most claims made under worker’s comp are awarded on a no-fault basis (see An Intro to Workers’ Compensation to learn more).

Worker’s compensation policies cover losses that arise from an injury to an employee while in the course of their duties. On a no-fault basis, injured employees do not need to prove negligence, and once an employee accepts compensation from worker’s comp, they lose the right to sue.

However, if the claim is denied, the employee reserves the right to sue the employer for damages. This employer’s liability coverage is provided by the second part of a worker’s compensation insurance policy that is usually attached to a business owner’s commercial general liability policy.

That being said, employer’s liability insurance protects employers from negligence claims brought on by injured employees (or their spouses and dependents). In this case, an employee would need to show that the injury would not have occurred if it had not been for the negligence of the employer. For example, an employee can bring a lawsuit for hearing damage as a result of an employer’s failure to provide adequate hearing protection.

The employer’s liability portion of this policy covers things like:

• Cost of mounting a legal defense
• Settlements
• Damages or other judgments (note that this insurance only covers compensatory damages, not nominal or punitive ones)
• Other court costs, including interest and loss of income as a result of court appearances