Key takeaways
– Workers’ Compensation Coverage B—commonly called Employers’ Liability—is the part of a workers’ compensation insurance policy that responds when an injured employee sues the employer (or family sues after a death) for damages beyond statutory benefits.
– Coverage A (the statutory workers’ compensation portion) satisfies state-mandated benefit obligations (medical care, wage replacement, disability). Coverage B pays additional damages when a tort claim or negligence suit is allowed.
– Coverage B limits and rules vary by insurer and state; common employer’s liability limits are often shown as three numbers (for example, $100,000/$100,000/$500,000), but businesses should choose limits based on risk and potential litigation exposure.
– Many states require employers to carry workers’ compensation (Coverage A); a few “monopolistic” states require use of a state fund and may require special handling for Coverage B exposures.
How Workers’ Compensation Policies are structured
– Part A — Workers’ Compensation (statutory): Pays benefits specified by state law for work-related injury or illness (medical, wage replacement, disability, death benefits). This is usually mandatory where applicable.
– Part B — Employers’ Liability: Pays damages an employer is legally obligated to pay because of an employee’s bodily injury or disease that is not covered by the statutory schedule (for example, when employee pursues a negligence suit). It responds to third-party lawsuits against the employer or suits seeking damages beyond statutory benefits.
– Part C — Other States Insurance (if applicable): Provides statutory coverage when the insured has employees working in states not listed on the policy.
How Workers’ Compensation Coverage B works (practical overview)
– When an employee is injured on the job, the statutory workers’ compensation (Part A) typically pays medical costs and wage replacement according to the state schedule. In most cases, workers’ comp is the exclusive remedy—meaning the employee cannot sue the employer.
– Exceptions arise where an employee asserts employer negligence outside the statutory scheme (e.g., gross negligence, failure to provide a safe workplace, defective equipment knowingly left unrepaired). In those cases an employee or their survivors may bring a common‑law tort suit; Coverage B responds subject to policy terms and limits.
– Coverage B generally covers legal defense costs and settlements or judgments for compensatory damages (medical, lost earnings, pain and suffering, disfigurement, death benefits above statutory amounts), up to policy limits. It typically does not cover statutory fines and penalties or intentional acts by the employer.
Common Coverage B exposures and triggers
– Employer negligence causing a serious injury (e.g., failure to repair a known hazard).
– Third‑party over actions (employee sues employer rather than accepting only statutory benefits).
– Claims for loss beyond statutory wage replacement and medical schedules (pain and suffering, punitive damages in some jurisdictions, though punitive damages may be excluded in many policies).
– Lawsuits by family members after a workplace death seeking wrongful‑death damages beyond statutory death benefits.
Special considerations for employers
– State law differences: Benefits, claim procedures, and exceptions to the “exclusive remedy” doctrine vary by state—review state statutes and consult counsel or your broker.
– Monopolistic states: In states that require use of a state workers’ compensation fund (e.g., Ohio, North Dakota, Washington), employers still need to address employers’ liability exposure—often accomplished by an endorsement or by purchasing employer’s liability from a commercial insurer or via an umbrella/excess policy.
– Limits and umbrella protection: Common employer’s liability limits appear in three parts (for example, $100,000 each accident / $100,000 each employee disease / $500,000 policy limit disease aggregate). Because negligence suits can exceed primary limits, many businesses place employers’ liability on their commercial umbrella/excess policy; ensure the umbrella specifically schedules employers’ liability if needed.
– Independent contractors and subcontractors: Misclassification can create exposure. Confirm contract language and obtain certificates of insurance from subcontractors. Some states treat subcontractor employees as a company’s employees in limited circumstances.
– Return-to-work and safety programs: Strong safety and injury management reduce severity and litigation risk. Document hazard correction and safety training to help defend against negligence claims.
– Claims handling: Prompt reporting, investigation, and cooperation with the insurer are essential. Keep thorough incident files, witness statements, photographs, maintenance logs, and training records.
Example (illustrative)
– Situation: A production worker notices exposed, faulty wiring on a machine and reports it. The employer does not repair it. The worker is electrocuted and suffers catastrophic injury. The state’s workers’ compensation system will pay statutory medical and wage replacement benefits (Part A).
– Potential Coverage B trigger: If the employee or family alleges employer negligence (failure to repair a known hazard) and sues for damages beyond statutory benefits (pain and suffering, higher lost-earnings claims, punitive damages where permitted), Employers’ Liability (Coverage B) responds for defense and indemnity up to policy limits. If the insurer’s primary Coverage B limit is exhausted, an umbrella/excess policy (if it includes employers’ liability) may provide additional coverage.
Practical steps for employers (step-by-step checklist)
1. Know your state law
• Confirm whether workers’ compensation is required and the required minimum benefits.
• Determine if your state has a monopolistic fund and how that affects Coverage B.
2. Buy the right policy and limits
• Purchase a workers’ compensation policy that includes Employers’ Liability (Coverage B).
• Set limits based on payroll, industry risk, litigation exposure, and asset protection (consult broker/insurer).
• Consider an umbrella/excess policy that specifically schedules employers’ liability if you have significant litigation exposure.
3. Verify subcontractors and independent contractors
• Require certificates of insurance from subcontractors showing workers’ compensation and employers’ liability.
• Reassess contractor classification to avoid inadvertent exposure from misclassification.
4. Implement safety, training, and hazard controls
• Maintain written safety programs, regular inspections, and training.
• Document hazard reports and corrective actions.
5. Create a claims-response plan
• Train supervisors on immediate reporting procedures.
• Preserve evidence, gather witness statements, and take photos.
• Notify your insurer promptly and cooperate with the adjuster.
6. Manage loss and return-to-work
• Provide timely medical care and modified-duty options to reduce lost time.
• Maintain communication with injured workers and document all actions.
7. Review and update coverage annually
• Reassess payroll, classification codes, new operations, and exposures each year.
• Review policy endorsements (e.g., for employers’ liability in monopolistic states).
Practical steps for employees (what to do if injured)
1. Seek immediate medical care for injuries.
2. Report the injury promptly, in writing if possible, following employer procedures and state deadlines.
3. Keep copies of medical records, wage statements, and any communications about the injury.
4. Follow prescribed medical treatment and return‑to‑work evaluations.
5. If benefits are denied or you believe employer negligence caused the injury, consult an attorney experienced in workers’ compensation and employers’ liability claims.
Common questions (brief)
– Is Coverage B required? Employers’ Liability (Coverage B) is typically included in workers’ compensation policies and is essential for protecting against suits; the statutory requirement pertains mainly to Coverage A (workers’ compensation), which is mandatory in most states.
– Do workers give up the right to sue the employer? In most cases, statutory workers’ compensation is the exclusive remedy, but exceptions allow lawsuits (and trigger Coverage B) in certain negligence or intentional‑act scenarios. State rules vary.
– What limits should I buy? There is no one‑size‑fits‑all. Consider the severity of potential injuries in your industry, company assets, contractual requirements, and consult your broker/insurer for appropriate limits and umbrella protection.
When to consult professionals
– Consult an insurance broker/agent to structure appropriate workers’ compensation and employers’ liability coverage for your business.
– Consult an employment/insurance attorney if your business faces complex exposures, pays benefits in monopolistic states, or if you have a denied or large claim.
Sources and further reading
– Investopedia. “Workers’ Compensation Coverage B.” (accessed June 20, 2021).
– Insurance Information Institute. “Insuring Your Business: Small Business Owners’ Guide to Insurance: Workers Compensation Insurance.” (accessed June 20, 2021).
– Insurance Information Institute. “Should I Purchase an Umbrella Liability Policy.” (accessed June 20, 2021).
– National Federation of Independent Business (NFIB). “Workers’ Compensation Laws – State by State Comparison.” (accessed June 20, 2021).
– Cornell Law School, Legal Information Institute. “Workers’ Compensation.” (accessed June 20, 2021).
– SFM Mutual Insurance Company. “What Are Employer Liability Limits.” (accessed June 20, 2021).
– Ohio Bureau of Workers’ Compensation. “Ohio Workers’ Compensation and You.” (accessed June 20, 2021).
Disclaimer: Workers’ compensation and employers’ liability laws vary by state and change over time. This article is for general information only and is not legal or insurance advice. Consult your broker, insurer, or attorney for guidance tailored to your situation.