Workers' Compensation vs Employer's Liability
Tony Ca?as, CPCU, MBA, AU, ARM, ARe, AIC, AIS
Insurance and Insurtech Talent Matchmaker | P&C Insurance Nerd | Best Selling Author | Speaker | 28k+
The Difference Between Workers’ Compensation and Employer’s Liability
Today we continue our introductory series on Commercial Lines Insurance for personal lines agents, CSRs and underwriters.
Most insured’s purchase Workers’ Compensation (WC) policies because of the legal requirement of the state(s) have that they are operating in. But, what most insured’s don’t understand is the difference between WC and Employer’s Liability coverage, which is usually included as a separate coverage on their WC policy.
Image via totalwc.com
WC policies provide coverage for employees if they are injured while working, without regard to fault. The policies will pay for medical expenses as well as loss of income due to not being able to work. The policy declaration pages show “Statutory” for the limit, meaning that the carrier must pay whatever the legal requirement is in the respective state. In other words, the limit on a WC policy is mandated by each state and can vary depending on the type of injury. Here’s an example:
A waitress trips and falls while serving food and breaks her ankle. The cost of the medical expenses is $3,000 and the time she missed away from work caused her to lose $1,000 in income. The WC policy will provide coverage for $4,000 (the total medical expenses plus the total loss of income).
Image via bishoplegal.com
The other part of a WC policy is Employer’s Liability. This provides coverage for an employer in the event an employee does not feel the WC policy provided adequate coverage and that the employer was negligent. It is important for agents to read the policy language defining the specific triggers for employer’s liability coverage. Most policies will only respond to very specific instances in which the insured can be found liable to the employee or a related third party such as a spouse. Here’s an example of this coverage:
A construction worker feels that using a steel ladder will best help him complete his roofing job. However, the employer feels that using a wooden ladder is best and mandates that he use the wooden ladder. While working on the wooden ladder, it collapses and the employee is injured. He files a WC claim but does not feel it is adequately reimbursing him for his lost wages while he is unable to work. He files a claim against the employer claiming that they were negligent in not providing an adequate ladder for the job. The Employer’s Liability policy will provide coverage for this claim.
Image via thinkglink.com
Note that the Employer’s Liability coverage lists a specific limit, unlike the WC policy which is statutory. In monopolistic states (where the WC coverage is required to be purchased from the state), the Employer’s Liability coverage can be found on the General Liability policy.
This article was co-written by Tony Canas, RVP of the West Coast atInsNerds.com and Carly Burnham, RVP of the East Coast at InsNerds.com.
Tony Canas is a young insurance nerd and speaker. He has worked in claims, underwriting, finance and sales at three different insurance carriers, five cities and four states. Currently he’s the Territory Sales Manager for Northern California at American Modern Insurance, a part of Munich Re, the world’s largest reinsurance company. Tony is also the Vice President of the Golden Gate CPCU Society and a member of the New Designee Committee at the National CPCU Society. Tony is passionate about insurance, technology, innovation and about engaging Millennials in the insurance industry.
Carly Burnham is the other half of the dynamic duo. She’s currently a Commercial Lines Underwriter at Erie Insurance. Carly is also a Director at the Presque Isle CPCU Society and a member of the New Designee Committee at the National CPCU Society. As a co-founder at InsNerds.com she has the difficult task of being Tony’s co-author, keeping his constant flow of crazy ideas focused and helping fleshing them out into useful articles.
Tony and Carly are both CPCUs and have MBAs from Iowa State and they met while running Nationwide’s Gen Y Associate Resource Group.
If you liked this article you might like some of previous ones:
- 5 Differences Between Commercial and Personal Lines Insurance
- C.O.P.E and the Commercial Risk
- Understanding Co-Insurance
- A Game Changer for Your Residential Investors
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9 年Tony, When I worked for a retail broker in the NYC area handling wrap-up claims, I would sometimes have to set up four separate files for one claim. The first was the WC claim on the WC policy, the second was the EL claim on the WC policy, the third was the GL claim on the GL policy, and the fourth was the Third-Party oversuit claim on the GL policy. Depending upon which state, either NY or NJ, the claims were handled in four different offices of the same insurer, AIG, two WC offices in NY and NJ, and two GL offices in NY and NJ. So thank you for that review of my past life as a Claims Administrator for a wrap-up broker.