Workers Compensation vs Employers Liability Insurance: Know The Difference

In recent years, state and federal worker’s compensation laws have paid out over $7 trillion in benefits.

These laws are instituted to protect the employee and the employer in the event of a workplace accident. It is the employer’s job to provide a safe work environment. When this doesn’t happen, an employee may bring a personal injury claim against the employer.

This is where Employer Liability Insurance comes in. Lack of planning can leave your business bankrupt.

But what is the difference between employer’s liability insurance vs worker’s compensation?

Keep reading to find out.

Workers Compensation

Worker’s comp is state-mandated coverage for employees that incur work-related injuries or illnesses. Employees can file a claim while at work, traveling for business, or attending a work function. Not all employers are required to have worker’s comp insurance. This depends on the number and type of employees and the work performed. The law varies from state to state.

Typically, an employee qualifies for worker’s comp unless:

• The injury is sustained while under the influence of drugs or alcohol
• Injury occurs under violation of company policy
• The employee is injured during criminal activity
• Injuries are self-inflicted
• The employee was not on the job

Proof

Employees are not required to prove that the employer was at fault in order to receive compensation for injury or illness. They need only to have been an employee and sustained a work-related injury. Also, they must meet the state’s deadline for reporting in order to receive benefits. 

Coverage

Worker’s compensation covers an employee that was injured or became ill while on the job. This includes things like falling off a ladder, carpal tunnel syndrome and hurting your back while lifting boxes. Benefits cover all related medical expenses lost wages, disability, and rehabilitation.

When an injury or illness is fatal, the spouse and children of the employee are eligible to receive benefits for lost wages and funeral costs. The amount paid out is limited by the state. In some places, a minimum payment is set depending on the type of injury.

Worker’s compensation only pays for claims related to a tangible injury. An employee cannot seek damages for pain and suffering.

Reporting Time Frame

Each state sets its own time limits for reporting illness or injury to the employer in order to be eligible for benefits. Most states set a time frame of 10 to 90 days. After the injury is known, the employee must then file a claim with the state labor board for worker’s comp. The employer may take care of this step in some cases.

The employee typically has 1 to 3 years from the date of injury to file a claim. This time is extended for cumulative trauma and occupational disease injuries.

Employee Liability Insurance

Employer Liability insurance protects the employer in cases where worker’s comp doesn’t cover an employee’s injuries or illnesses. This kind of coverage is usually offered in the same plan as worker’s compensation. It is not mandated in all states but will mitigate the damages caused by a lawsuit against your business. 

There are limited circumstances where an employee can sue the employer because of injury:

• The injury occurred as a result of toxic substance exposure such as asbestos
• The injury occurred as a result of the employer’s conduct
• The employer doesn’t carry worker’s comp insurance

Proof

The employee must be able to prove that the employer intentionally acted in a way that would result in injury. For example, an employee informs of inadequate equipment used to perform a job but the employer disagrees and doesn’t replace the equipment. If the employee is hurt using the inadequate equipment, they now have grounds for suit outside of worker’s comp.

The employee must also prove that they sustained injury. Medical bills and loss of wages are considered proof.

Coverage

Employer Liability insurance covers punitive damages such as pain and suffering on the behalf of the employee. Claims covered by Employee Liability Insurance:

• Loss of Consortium: The spouse of the injured party is able to sue for damages relating to the loss of income
• Consequential Injury: This covers lawsuits brought by a third party that is injured physically or mentally as a result of the employee’s injury. Back strain of a caretaker, for instance.
• Dual Capacity: If an employee is injured by an employer’s product, the employer is liable as a manufacturer and as the employer.
• Third Parties: If an employee suffers an injury at the hands of a third party and sues them, the third party can then seek damages from you.

Reporting Time Frame

If an employee seeks damages outside of worker’s comp, the window to do so is short. An employee that chooses to bring a personal injury lawsuit against an employer typically has 1 year to do so. In some states, this number starts from the date of discovery of the injury.

Employers Liability Insurance vs Worker’s Compensation

Employers Liability insurance vs workers compensation are similar but have key differences.

Depending on the state, Worker’s Comp and Employer Liability insurance are part of the same plan. They both provide compensation for an employee’s injuries. Employer Liability offers further protection if the employee decides to bring a lawsuit.

Although payout from worker’s compensation can be small, the employee does not have the burden of proof.

Lawsuits can be unpredictably long. During this time the employee has to wait for compensation for injury. A benefit of worker’s comp is that it begins as soon as the injury occurs. The potential damages won from an Employee Liability claim are significantly higher than from a worker’s comp claim.

Inadequate insurance coverage can cause irreparable damage to your business. Click here to discover how you can protect your business from injury.