Is Employer’s Liability Insurance the Same as Worker’s Compensation?

Did you know that the net premium written for workers comp in 2020 was over $45 million? But, you may wonder what the difference is between liability insurance vs worker’s compensation.

If that’s the case, we invite you to keep reading this post since we’ll go through the main difference between employer’s liability insurance and worker’s compensation. Additionally, we’ll provide some examples to help you better understand the difference.

Employer’s Liability Insurance

This type of business insurance covers legal defense costs in the case an employee files a lawsuit against your business due to an injury. For example, in the landscaping business, Employer’s Liability Insurance or Employment Practices Liability Coverage will cover the costs of defending your landscaping business and any employees involved against types of claims like sexual harassment claims, wrongful termination, discrimination, etc. In addition, this insurance will cover the cost of a lawyer and paying a settlement.

But, suing for punitive damages is only one of many types of lawsuits a company may face. So, let’s look at some other types of lawsuits covered by this insurance.

Third-Party-Over Action

A third party may file a lawsuit against your company if an employee sues them. For example, an employee injured by machinery may sue the equipment manufacturer. And in turn, the equipment manufacturer may sue your company for that lawsuit.

Loss of Consortium

If an employee contracts a disease or dies due to a workplace accident, a family member can file a loss of consortium lawsuit. As you can imagine, the lawsuit can seek reimbursement for medical care or funeral services. Fortunately, the employer’s liability insurance covers the lawsuit and any other expenses.

Worker’s Compensation

Workers comp is a type of insurance businesses have to cover medical expenses and wage payments to employees injured while working. But this insurance covers more than medical care since it also includes repayment for rehabilitation. But, the main difference is that employees give up their right to file a lawsuit against their employer for negligence if an accident occurs.

That’s why it’s critical for employees to know that your company provides workers comp since in the case they file a lawsuit, they’ll come out losing.

Let’s take a look at an example of worker’s compensation in action.

An office worker trips and breaks their wrist while walking to their chair. Their medical bills amount to $1,200 along with the two months of missed work, which is $4,000 of lost income. Worker’s compensation will then reimburse the employee $5,200 for medical expenses and income.

If you need other examples of worker’s comp claims, you can find more here.

Now You Know What Employer’s Liability Insurance Is

Hopefully, with this brief article, you better understand the differences between employer’s liability insurance and worker’s compensation. But, of course, every state has different policies when it comes to these insurances, so make sure to research the laws of your state. And, don’t forget to always follow the best employment practices in your company!

Did this post help you understand employer’s liability insurance? If so, please feel free to look at our other insurance-related articles before you leave!

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