Employer’s Liability Insurance: What Is It? What Does it Cover? Everything You Need To Know.

In today’s workplace, Employer’s Liability Insurance is very important. More and more businesses are hiring independent contractors, freelancers, and consultants instead of permanent employees. These types of workers have several advantages over traditional employees, such as lower costs and no fixed work locations or schedules. However, these workers also come with their own set of risks that you need to be aware of before working with them. If you contract with a freelancer or independent contractor to work on an assignment for your business, they aren’t your employee, and that means they won’t have worker’s compensation insurance to cover them if they get injured while doing their job on your behalf.

That doesn’t make them any less likely to suffer injuries while working for you; in fact, studies show that the self-employed contracted workforce has a higher rate of workplace injuries than traditional employees. Thankfully, you can do something about it: Employer’s liability coverage protects you from legal repercussions if one of your contractors or freelancers is injured while working for you and sues you for negligence. Read on to learn more about this type of coverage, what it covers, and how much you should have; because even though contractors don’t have worker’s comp as an employee would, they still deserve the same level of protection from workplace injuries as anyone else.

What is Employer’s Liability Insurance?

Employers’ liability insurance is an insurance policy that handles claims from workers who have suffered a job-related injury or illness not covered by workers’ compensation. A type of liability insurance, it can be packaged with workers’ compensation to further protect companies against the costs associated with workplace injuries, illnesses, and deaths.

However, employers’ liability insurance does not cover legal costs from employee lawsuits charging discrimination, sexual harassment, or wrongful termination. To cover these situations, an employer would need to purchase a separate type of policy called employment practices liability insurance (EPLI).

What Does Employer’s Liability Insurance Cover?

• Third-party lawsuits: Filed by another entity distantly involved in the workplace incident. An employee may be injured by a piece of equipment on the job, for example, and sue the equipment manufacturer, who then files suit against the employer.
• Loss of consortium lawsuits: Filed by family members of a deceased or disabled employee, seeking compensation for the loss of the relative or their income.
• Consequential bodily injury lawsuits: Filed by a non-employee who suffers physical damage as a result of an employee’s injury, such as a spouse who develops health problems from taking care of the injured worker.
• Dual-capacity lawsuits: When an employee sues their employer both as an employer and as something else, the maker of a product, provider of a service, landlord, etc. One example: A piece of a ceiling in the workplace falls and hits a worker, and they file suit against their company in its dual capacity as employer and as the premises owner.
• Employers’ liability insurance covers companies against costs and claims by employees that are not covered by workers’ compensation.

Benefits of Employer’s Liability Insurance

• Displaying coherent compliance with the law

To be protected by the law, it is important to show compliance. The employer displays a show of trustworthiness by participating in the provincial workplace compensation fund and getting the employer’s liability insurance. It also enhances their reputation and would entice people to work for an employer who follows the rules and guidelines.

• Caring for employees

An employer needs to demonstrate caring for the well-being of their employees. It provides an additional psychological benefit because if the workers feel happy and safe in their workplace, it enables better mental health and makes them better and more efficient.

• Coverage for lost wages or medical bills

Worker’s compensation does not cover all the many types of costs and incidentals from an incident. Thus, an employer’s liability insurance policy enables employers to be protected from extreme and sudden financial strains caused by claims that would otherwise not be covered through worker’s compensation funds.

• Coverage for legal fees

Like lost wages and bills, legal fees can accumulate quickly. Hence, employee liability insurance provides an additional protective layer to employers against such financial burdens.

How Much Does Employer’s Liability Insurance Cost?

The cost of employer’s liability insurance depends on your business and your workers’ compensation claims history.

To determine your premium, insurance companies will consider your payroll costs and employee classifications, like what kind of work your employees do. Businesses typically save money if their employees:

• have lower salaries
• do less dangerous work
• haven’t been injured or fallen ill in the past

If you’ve never filed a workers’ comp claim, then you’ll likely pay less for this policy.

When Should You Get Employer’s Liability Insurance?

Employer’s liability insurance isn’t something you should just buy haphazardly. It’s important to carefully consider the contractors or employees you will employ and ensure they are fully covered. If an employee isn’t covered by the employer’s liability insurance, you will be responsible for their medical expenses, wages, and legal fees if they get injured while working for you.

Employer’s liability vs. employment practices liability insurance (EPLI): What’s the difference?

Employers’ liability coverage helps pay for lawsuits over employee injuries. And Employment Practices Liability Insurance (EPLI) covers lawsuits related to employment practices.

Both policies protect business owners from employee lawsuits, however, EPLI is a separate insurance policy that protects your business from allegations of employment discrimination, wrongful termination, or cultivating a hostile work environment.

Unlike employer’s liability insurance, EPLI is not included in workers’ compensation insurance.

Check with a Shimin Insurance Agent to see if your workers’ compensation policy includes the protection you need. For free quotes from top insurers, fill out Shimin’s online application with details about your business.