Cassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Written By Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Personal Finance Reviewer and Writer Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
| Lead Editor, Insurance
Updated: Dec 22, 2023, 5:12am
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Imagine for a moment that one of your employees slips and falls at work. They think you’re responsible, so they sue. If you don’t have the right type of business insurance, you could be stuck paying out-of-pocket for your legal defense.
Nearly one in five small businesses face employee litigation, according to Insureon. If one of your employees sues you for a workplace accident, employer’s liability insurance can help cover your legal costs.
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Employer’s liability insurance is a type of business insurance that protects companies from lawsuits that stem from workplace accidents. The policy will pay for your legal fees, including judgments and settlements.
For example, let’s say you own a restaurant and your chef sues you after suffering burns due to a fryer. The chef claims your negligence in maintaining the fryer led to the accident. Employer’s liability insurance will cover your legal costs, even if the chef’s claims have no merit.
In most states, employer’s liability insurance is included as part of workers compensation insurance. But there are four “monopolistic states” that do not include employer’s liability insurance as a part of workers comp. In these states, you’ll need to buy separate employer’s liability coverage.
Here are the four monopolistic states:
Employer’s liability insurance is included in most workers compensation policies but the two are totally different.
Workers compensation insurance is required in most states if you have employees (even if it’s just one employee). If your employee gets sick or injured while performing a job-related duty, workers compensation covers:
Employer’s liability insurance covers your legal fees and costs if an injured or sick employee blames you for the injury or illness.
Employer’s liability insurance covers legal fees, settlements and judgments brought on by these four types of lawsuits:
This type of lawsuit is filed by a non-employee if they’re affected by your employee’s injury or illness.
For example, if your employee suffers a severe injury in a lawnmower accident and their immediate family member suffers a heart attack due to the stress of the incident, the family member can sue your company for damages.
If you have a secondary relationship to your employee, your employee could file a dual-capacity lawsuit if they get sick or injured at work.
For example, if you manufacture lawnmowers and your employee gets hurt while using the lawnmower, your employee could sue you as both the manufacturer and employer.
If your employee suffers a severe injury or illness or dies from a work-related incident, your employer’s family member can file a lawsuit for damages.
For example, let’s say your employee suffers a severe injury in a lawnmower accident and can no longer work. Your employee’s spouse could file a lawsuit for punitive damages.
A third-party lawsuit can be brought against you when your employee sues another business because of an injury or illness, and in turn, that business sues you.
For example, say you own a lawn care business and one of your employees hurts themselves mowing. Your employee sues the lawnmower manufacturer, claiming it is faulty equipment. Then the lawnmower manufacturer sues you, claiming that the accident was caused by improper maintenance and care.
Employer’s liability insurance doesn’t cover claims related to:
If your business has employees (even just one), employer’s liability insurance is an essential coverage type. That’s because nearly 20% of small businesses face employee litigation, according to Insureon. Even in low-risk industries like accounting or tech, there are risks of employees slipping at work or suing for carpal tunnel.
In most states, employer’s liability insurance will be included as part of your workers compensation coverage. But if you live in a monopolistic state, you’ll need to buy a separate employer’s liability insurance coverage. Those states are North Dakota, Ohio, Washington and Wyoming.
If you have employer’s liability insurance through your workers comp policy, then it’s already calculated to be the correct coverage you need based on your payroll size and industry.
If you don’t have coverage, an independent insurance agent can work with you to determine how much coverage you need.
The median cost of workers compensation insurance is $45 a month, according to Insureon. That includes the cost of employer’s liability insurance, which is part of your workers compensation insurance in most states.
Here are some factors that will affect your employer’s liability insurance costs:
Employer’s liability insurance is included as part of your workers compensation insurance, except for the following monopolistic states:
In most states, you’ll be able to buy workers compensation insurance from a private insurance company or a state-run agency. It’s a good idea to get quotes from multiple business insurance companies to find the best coverage and price.
If you own a business in a monopolistic state, you will need to buy your workers compensation insurance from a state-run agency. To get employer’s liability coverage in these states, you will need to purchase “stop gap coverage” which is commonly sold as an endorsement to your general liability insurance.
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Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying off $18,000 in debt within 10 months of graduating college. She later went on to triple her salary in two years by ditching her 8-to-5 job to write for a living.
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