Employers Liability Insurance: What is Covered in Part Two?

In the standard Workers Compensation and Employers Liability policy, Part One handles the statutory obligations mandated by state law. However, because the Exclusive Remedy Doctrine is not an absolute shield, employers remain vulnerable to certain types of lawsuits that fall outside the scope of no-fault statutory benefits. This is where Part Two: Employers Liability Insurance becomes critical for a business owner.

Employers Liability provides coverage for the legal expenses and damages an employer is legally obligated to pay due to bodily injury by accident or disease to an employee. Unlike Part One, which has no dollar limits for medical and indemnity payments, Part Two is subject to specific policy limits and involves a determination of negligence or legal liability. If you are preparing for the practice Workers Comp questions, understanding the distinction between these two parts is essential for passing the exam.

Part Two is designed to cover specific scenarios where an employer can still be held liable for an employee's injury despite the existence of Workers Compensation laws. There are four primary categories of claims that students must memorize for the insurance exam:

• Third-Party Over Actions: This occurs when an injured employee sues a third party (such as a machinery manufacturer), and that third party then sues the employer for contributory negligence. For example, if a manufacturer is sued because a machine injured a worker, the manufacturer might claim the employer removed the safety guards, thereby dragging the employer into the litigation.
• Care and Loss of Services (Loss of Consortium): This involves lawsuits brought by the spouse or family members of an injured employee. They may sue the employer for the loss of the employee's companionship, affection, or household services resulting from a workplace injury.
• Dual Capacity Actions: This arises when an employer is sued in a capacity other than as an employer. For instance, if an employee is injured by a product manufactured by the employer (acting as a manufacturer rather than an employer), the employee may be able to sue under product liability.
• Consequential Bodily Injury: This covers injuries to a family member that arise as a direct consequence of the employee's injury. An example would be a spouse suffering a heart attack upon hearing of the employee’s severe workplace accident.

While Part Two offers broad liability protection, it is not a "catch-all" for every legal issue an employer faces. On the exam, you will likely be tested on what is excluded. Key exclusions include:

• Liability Assumed Under Contract: Part Two does not cover liability the employer assumes under a contract (though this may be covered under General Liability).
• Punitive Damages: Most policies exclude fines, penalties, or punitive damages imposed because an employer violated a law.
• Intentional Acts: Bodily injury intentionally caused or aggravated by the employer is never covered.
• Statutory Obligations: Part Two does not cover any obligation that should be handled by Workers Compensation, Disability Benefits, or Unemployment Compensation laws.
• Employment Practices: Claims involving wrongful termination, discrimination, or harassment are excluded (these require Employment Practices Liability Insurance, or EPLI).

For a broader look at how these exclusions fit into the overall policy, see our complete Workers Comp exam guide.