| John Bosman | 562 words
A manufacturing company in Ohio carries workers’ compensation through the state fund — the only option available there. When an injured employee’s attorney later sues the company directly, alleging the injury resulted from the employer’s own negligence, the business discovers something its workers’ comp coverage was never built to handle: Ohio’s state fund pays employee benefits, but it doesn’t include employers’ liability coverage at all. Without a separate stop-gap policy, that lawsuit has no insurance behind it. This is the coverage most business owners have never heard of until they need it — the part of a standard workers’ comp policy that responds when a workplace injury turns into a lawsuit against the business itself, not just a benefits claim from the employee.
Short answer
Employers’ liability insurance is Part Two of a standard workers’ compensation policy (Part One pays no-fault employee benefits; Part Two responds to lawsuits against the employer). Standard default limits are $100,000 per accident, $500,000 policy limit for disease, and $100,000 per employee for disease — often worth increasing. Four states (North Dakota, Ohio, Washington, and Wyoming) run monopolistic workers’ comp systems where the state fund doesn’t include employers’ liability at all, which means businesses there need a separate stop-gap endorsement to close the gap.
Reader checkpoint
- Do you know whether your workers’ comp policy actually includes employers’ liability coverage, or whether you operate in a monopolistic state (ND, OH, WA, or WY) that requires a separate stop-gap endorsement?
- Do you know your current employers’ liability limits, and whether the standard $100,000/$500,000/$100,000 minimums are enough for your business’s actual exposure?
- Could you explain the difference between employers’ liability insurance and Employment Practices Liability Insurance (EPLI) if asked — they’re not the same coverage despite the similar name?
Quick answer
Employers’ liability insurance is worth confirming, not assuming, because it’s easy to think workers’ comp alone protects a business from any work-injury lawsuit. It’s Part Two of the standard workers’ comp policy, it has its own limits that are often left at low defaults, and in four states it isn’t included in the state fund at all — meaning a stop-gap policy is the only thing standing between the business and an uninsured lawsuit.
At a glance
| Main Issue | Employers’ liability coverage — the part of a workers’ comp policy that responds to lawsuits, not just employee benefit claims — is often left at low default limits or missing entirely in monopolistic states. |
|---|---|
| Common Blind Spot | Confusing employers’ liability insurance with EPLI (Employment Practices Liability Insurance) — they sound similar but cover completely different things, and having one doesn’t mean you have the other. |
| Useful Document | Current workers’ compensation policy declarations page (to check Part Two / employers’ liability limits), and confirmation of which state(s) the business operates and has employees in. |
| Best Next Step | Confirm your employers’ liability limits with your agent, and if you operate in North Dakota, Ohio, Washington, or Wyoming, confirm whether you have a stop-gap endorsement in place. |
Defined Q&A
What Is Employers’ Liability Insurance, and How Is It Different From Workers’ Comp?: common questions
Does my workers’ comp policy actually include employers’ liability coverage, or do I operate in a state where I need a separate stop-gap endorsement?
Check whether your state is North Dakota, Ohio, Washington, or Wyoming — those four states run monopolistic workers’ comp funds that don’t include employers’ liability. Every other state includes it automatically in a standard workers’ comp policy.
What are my current employers’ liability limits, and are the standard defaults enough for my business?
The standard defaults are $100,000 per accident, $500,000 disease policy limit, and $100,000 disease per employee. Those are minimums, not recommendations — legal defense costs alone can approach those numbers before any settlement is factored in.
Am I confusing employers’ liability insurance with EPLI — do I actually know which one covers which type of claim?
Employers’ liability responds to lawsuits over workplace injuries. EPLI (Employment Practices Liability Insurance) is a separate policy that covers HR-type claims like discrimination, harassment, and wrongful termination. Having one does not mean you have the other.
The value of this article is that it gives you a cleaner way to look at commercial insurance before the decision becomes rushed. A better question asked early can prevent a frustrating answer later.
What employers’ liability insurance actually covers.
Workers’ compensation insurance is really two coverages in one policy. Part One pays no-fault benefits directly to an injured or ill employee — medical care and lost wages — regardless of who was at fault. Part Two, employers’ liability insurance, is different: it responds when someone sues the employer directly over a work-related injury, rather than simply filing a workers’ comp claim. That includes legal defense costs, court costs, and settlements or judgments up to the policy’s limits.
When Part Two actually gets used.
Workers’ comp is generally the “exclusive remedy” for a workplace injury, meaning an injured employee typically can’t sue their employer for the injury itself — they file a comp claim instead. Employers’ liability exists for the situations that fall outside that trade-off: claims that a third party brings against the employer in connection with a workplace injury, claims alleging the employer’s negligence went beyond what the comp system was designed to address, and other lawsuit types that vary by state law. Exactly which claims can proceed against an employer despite the exclusive-remedy rule differs from state to state, which is part of why confirming your own state’s specifics with an agent matters more than relying on a general rule of thumb.
Standard limits — and why the defaults are often too low.
The standard, default employers’ liability limit structure is $100,000 per accident, $500,000 policy limit for disease, and $100,000 per employee for disease. Those are minimums, not recommendations — a lawsuit’s legal defense costs alone can approach six figures before any settlement or judgment is factored in, and many businesses carry higher limits than the default once they understand what the number actually represents.
The gap in monopolistic states.
Four states — North Dakota, Ohio, Washington, and Wyoming — require employers to buy workers’ compensation exclusively through a state-run fund rather than a private insurer. Those state funds pay employee benefits, but they do not include employers’ liability coverage at all. A business operating in one of these states needs a separate stop-gap endorsement, typically added to a general liability policy, to close that gap. Without it, a lawsuit against the business over a workplace injury has no coverage behind it whatsoever.
What employers’ liability insurance does not cover.
Like most liability coverage, it excludes intentional acts — if an injury resulted from the employer’s intentional conduct or a criminal act, the policy won’t respond. It doesn’t pay OSHA fines, even when the fine relates directly to the injury that triggered the lawsuit. And it generally excludes punitive damages, which many states don’t allow insurance to cover in the first place.
Not the same thing as EPLI.
Employers’ liability insurance is easy to confuse with Employment Practices Liability Insurance (EPLI) because the names sound alike, but they cover different risks entirely. Employers’ liability responds to lawsuits over workplace injuries. EPLI is a separate policy that covers claims like discrimination, harassment, wrongful termination, and other employment-related HR claims. Having one does not mean a business has the other, and confirming which coverage actually applies to a given claim is worth doing before assuming either one has it handled.
Frequently asked questions.
Is employers’ liability insurance the same as workers’ compensation? No — it’s Part Two of the same policy, but it covers a different situation. Workers’ comp (Part One) pays employee benefits regardless of fault; employers’ liability (Part Two) responds when the business itself gets sued over a workplace injury.
Do I need stop-gap coverage? Only if you operate in North Dakota, Ohio, Washington, or Wyoming, where the state workers’ comp fund doesn’t include employers’ liability at all. Businesses in every other state get employers’ liability automatically as part of a standard workers’ comp policy.
Are the standard $100,000/$500,000/$100,000 limits enough? They’re the default minimums, not a recommendation. Legal defense costs alone can approach those numbers before any settlement is added, which is why many businesses choose to carry higher limits once they understand what the default actually covers.
What to do next
Use the related tool or ask for a review before you make coverage changes.
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