Employers’ Liability Coverage

The standard Workers’ Compensation Insurance policy consist of two parts:
Part A: Workers’ Compensation Insurance
Part B: Employers’ Liability Insurance
As we all know, Workers’ Compensation provides coverage for the cost of medical
services and for lost wages due to workplace injuries. Also, the insurance company will
pay the cost of defense (for the employer) for suits brought by injured employee with
reference to benefits payable. State laws prescribe benefit limits.
The second part of Workers’ Compensation policy is automatically included in the
coverage and is called Employers’ Liability. The policy provides coverage for employers
from suits brought by injured employees who “reject” the workers’ comp benefits or are
excluded under workers’ compensation statues. Several “special cases” apply.
Coverage Agreement for Employers’ Liability:
Insurer agrees to pay all sums up to policy limit that the employer is legally obligated to
pay as damages, because of bodily injury to employees and others.
Employers’ Liability is the exclusive source of coverage for tort actions against the
employer by the employee for job-connected injuries or disease.
All other policies exclude coverage for any type of work-related injuries. (CGL-AUTO)
Statutory workers’ compensation benefits are supposed to be the “exclusive remedy” for
injuries occurring in the workplace to employees. Normally employees cannot reject the
workers’ compensation benefits nor can they sue for higher awards. However, there are
several “special cases” that allow for injured workers or their families to “reject” w/c
benefits and bring tort actions for damages.
Tort Action-is a legal proceeding calling for compensation for damages from a civil
wrong. These are presented at common law NOT state workers’ compensation law.
The “special cases” that allow workers or spouses/dependents to sue an employer are:
1) Third-Party-Over-Actions-an employee is injured while at work and recovers
damage from a third-party (such as a manufacturer). The third-party then sues the
employer for negligence. Employers’ Liability kicks in and provides defense and
settlement cost. See Example 1.
2) Loss of Consortium-compensates the employees family for the loss of affection,
friendship, care, and loss of services. Usually used in an action in cases of death or
permanent total disability. See Example 2.
3) Consequential Injury-provides coverage in a case where injury is caused to a person
as a consequence of the primary injury or activity from another person. Usually used

in cases involving the transmission of a disease to a workers family members. See
Example 3.
4) Dual Capacity-this is the most controversial of the “special cases”. Employer is said
to have acted in two capacities when injury results from an employer manufactured
product that causes injury to an employee. This would exist in cases where the
employer-who is responsible for employee injuries-also is a manufacturer of a
product-therefore also responsible for injuries to consumers for product defects.
(product liability) See example 4.
Workers’ such as farm hands and domestic servants are sometimes excluded under state
workers’ compensation statues. Unlike Workers’ Compensation, Employers’ Liability has
set policy limits. There are set by the Insurance Services Office (ISO) who write most of
the insurance policies on the market.
Limits of Employers’ Liability are:
$100,000 for each accident that results in bodily injury.
$100,000 for bodily injury from disease for each employee.
$500,000 total policy limit
(as most carriers) offer increased limits up to $1,000,000.
This is sometimes needed for contact bidding purposes. Also it is needed to reach
underlying umbrella limits.
Area’s not covered by employers’ liability:
International Injury by Employer
Wrongful discharge or discrimination (defense only).
Punitive damages meant to punish the employer.
Contractual liability-Employer enters into a contract to assume liability of some kind-such
as a warranty.


1) Third-Party Over Action
Joe is operating a saw with a defective guard. Due to the defect Joe suffers an
amputated hand. Joe sus D & B Saw Company, Inc. in turn (over action) sues Joe’s
employer alleging the employer was partially negligent in letting Joe operate a
defective saw.
Employer’s liability insurance would pay for the defense and settlement cost of the
employer. See Westchester Gas Co. Vs. Westchester Estates 15NE2D567NY.
2) Loss of Consortium

An employee suffers and is indemnified for injury in the workplace. His wife sues out-
side of the workers’ compensation system for loss of companionship, duties of

maintenance and affection. Hitaffer Vs. Argonne 183FED.2D811.
3) Consequential Injury
Ed who removes asbestos from old buildings, leaves work and goes home to his family.
Not knowing his clothes carry the poisonous fibers into his home. His wife, children
and dog contract asbestos. They sue the employer alledging their disease is a
consequence of Ed’s work and therefore the employer is responsible. No case found.
4) Dual Capacity Suits
Ned is an employee of Bad Year Tue manufacturing. He is instructed to run an errand
for the company. Enroute, Ned’s truck blows a tire and he is severely injured. Ned sues
the employer on two fronts. One action as an employee and the other as a consumer of
the tire. (dual capacity) If the injury is “common to the public” the employer is said to
occupy a second capacity. Mercer Vs. Uniroyal, 49 Ohio App 2nd 279 (1976)
CPCU 4 (Second Edition Volumes I and II)
Commercial Liability Risk Management and Insurance