Employers Liability Insurance: Laws and Restrictions

Employers’ liability insurance protects your business against claims made by employees who obtain bodily injury, illness or disease during employment.

Legal Liability

Two parts of insurance that are required by law in most states are Workers’ Compensation and Employers’ Liability Insurance. Having these policies protect not only the employees, but also the employers from litigation from injuries sustained during working hours.

Every business that employs even one person has a legal responsibility to obtain employers’ liability insurance. This includes any business that employs sub-contractors, trainees, and temporary workers. Not having employers’ liability insurance can be punishable by law and for each day that you do not have your employees covered, you may face a fine. Without this coverage, a health and safety agency could shut your business down.

How It Protects

In the event that an employee is injured during work, monetary awards are guaranteed from their employer for any medical expenses and up to a specific percentage of their wages lost while unable to work or two-thirds of the employee’s salary. Awards are usually for “disability or death” sustained while the employee performs his/her duties with exception to negligence or intoxication on the employees part. Payment is also provided to survivors in the event of an employee’s death.

Employers’ liability insurance, which protects you, the employer, from claims made against you by your employees, is not the same as public liability insurance, which protects you, the employer, from claims made by a third-party who has sustained injury or loss due to business negligence.

Laws and Restrictions

According to some laws, there is a limit to the amount of compensation an injured employee can recuperate from their employer, and the laws remove the liability of co-workers as well.

The system is a safety net for all employees, but has been criticized for restricting the common-law rights of workers. In other words, workers’ compensation provides medical care and compensation in exchange for relinquishment of those rights to sue employers.

Employees who sustain an injury or illness because of employer negligence may pursue the employer for any compensation, even if the business ends up in liquidation. However, this policy will not cover the employer against any claims made due to sexual discrimination, wrongful dismissal, etc.

Note that your employers’ liability insurance certificate should be displayed and your employees should be able to access it. You can display the certificate on an information board within your business or you can scan it electronically and have it displayed on your website.

You will want to use an authorized insurer; otherwise, your policy will not be in effect and you could face fines for not having the correct coverage. If you cannot find appropriate coverage, as a last resort, you can purchase workers’ compensation insurance through the State Compensation Insurance Fund (SCIF), which is a state-operated entity intended to help you obtain the insurance on a non-profit basis. Most states have an entity such as this.

blog comments powered by Disqus