Worker’s compensation insurance and employer’s liability insurance are two distinct types of coverage that address different aspects of employer liability. While they are often purchased together as part of a comprehensive insurance package, it is important to understand their roles and differences. Let’s explore the dissimilarities between the two.
Workers Compensation Insurance
Coverage: Worker’s compensation insurance provides coverage for employees who suffer work-related injuries or illnesses. It typically covers medical expenses, lost wages, rehabilitation costs, and disability benefits for injured workers. This coverage is mandatory in most jurisdictions for businesses that employ workers and the coverage is dictated by the state as well as how the loss is calculated.
No-Fault System: Worker’s compensation operates on a no-fault system, meaning that employees are entitled to benefits regardless of who is at fault for the injury or illness. As long as the injury or illness occurred within the course of employment, the employee is generally eligible for compensation.
Exclusive Remedy: Worker’s compensation is considered an exclusive remedy, meaning that employees who receive benefits through this insurance generally cannot sue their employer for additional damages related to the injury or illness. The purpose is to provide a streamlined and predictable system of benefits for injured workers.
Employers Liability Insurance
Coverage: Employer’s liability insurance provides coverage for employers in cases where employees file lawsuits alleging that the employer’s negligence or failure to provide a safe working environment caused their injuries or illnesses. It covers legal costs, settlements, and judgments arising from such claims.
Legal Defense: Employer’s liability insurance focuses on defending employers against claims made by employees that are not covered by worker’s compensation. This includes claims related to situations where the employee believes the employer was at fault for the injury or illness, such as cases of negligence or inadequate safety measures.
Third-Party Claims: Employer’s liability insurance may also cover claims made by employees against third parties, such as contractors or suppliers, alleging that their actions contributed to the employee’s injury or illness. This coverage protects employers when they are held liable for injuries caused by third parties.
Exclusions: Employer’s liability insurance generally excludes intentional acts by the employer, as well as claims related to discrimination, harassment, or wrongful termination. These risks are typically covered under separate policies such as Employment Practices Liability Insurance (EPLI).
In summary, worker’s compensation insurance primarily focuses on providing benefits to injured workers regardless of fault, while employer’s liability insurance protects employers against lawsuits filed by employees alleging negligence or inadequate workplace safety measures. While worker’s compensation is mandatory coverage, employer’s liability insurance is typically an additional coverage that complements worker’s compensation and provides an extra layer of protection for employers.