Do you have Employers Liability?
Since, in the spirit of Workers’ day, we are talking about all things work-related within the insurance industry, now would be the ideal time to tell our clients about employers liability insurance.
This type of short-term insurance product helps protect business owners from the financial losses they would incur if a staff member or third party (e.g., client) files a lawsuit against you due to a work-related injury, illness, or death. Without this insurance, business owners would be responsible for covering costs related to the lawsuit out of pocket, which could add up significantly after a serious accident. Below is a brief Q&A about employers liability insurance:
Is Employers Liability the same as Workers’ Compensation?
Not exactly. If you are a business owner, you are likely to require workers compensation insurance, which generally offers two kinds of protection.
Medical and lost wages
Medical and lost wages protection helps business owners pay for medical bills and lost wages if the owner or employee gets hurt or ill on the job. This coverage is a no-fault system, which essentially means that a payout is made no matter who’s responsible for the accident as long as (it goes without saying) the incident was not intentional.
On the other hand, employer liability coverage will kick in if someone (be it an employee, client, supplier, etc.) files a lawsuit because they believe that the business owner’s actions (or failure to act) result in or worsen that person's illness or injury. The payout can be used to compensate for settlements, damages, judgments, court costs and/or legal fees.
What does Employers Liability Protect you from?
This coverage can protect you from five main kinds of lawsuits. Bear with us here; you will need to familiarise yourself with some unavoidable legal jargon to find out more about your liability risks. Here are the most common types of claims that employers liability covers:
Most people are more or less familiar with this one. This kind of lawsuit is filed if an employee gets hurt on the job because the business owner didn’t take sufficient or adequate measures to ensure their safety. For example, an employee is working on a construction site and damages their eyes from welding. The medical and lost wages would kick in and cover the employee’s medical bills and lost wages from being unable to work. But suppose said employee sues the owner for negligence because he claims that they failed to provide the appropriate safety equipment, and now he has a permanent visual impairment. In this case, employers liability will cover the costs related to the claim.
Consequential bodily injury
Work-related injuries have the potential to affect people who care for those who were injured. If a spouse of the injured employee gets sick or injured due to caring for them, they can also sue the employer. For example, a wife claims she injured her back while lifting the now disabled employee in and out of a wheelchair.
Third-party over action
This is a confusing one to understand. This lawsuit is filed if an employee sues a business because of a workplace injury or illness, and that company turns around and sues the business owner. Employer liability will cover this claim. Let’s say that an employee trips over a broken tile and, as a result, is severely injured. The employee sues the tile company for inadequately tilling the floor. Upon being sued by the employee, the tiling company sues the business owner that this employee works for. Hence, the tiling company essentially passes the employee’s negligence lawsuit back onto the business owner.
This lawsuit is a bit of a double whammy. Suppose an employee is injured by a piece of equipment that a company produces (e.g., construction vehicle). In that case, the employee can sue you as BOTH their employer and the equipment manufacturer.
Loss of Consortium
Loss of consortium action is brought about by a spouse or family member who experiences a loss due to the employee's injury or death. Compensations for these kinds of claims are over and above the disability and death benefits that the family may receive the medical and lost wages coverage.
We at PBA Financial Services are committed to helping businesses get the appropriate insurance coverage required to safeguard against financial losses. Contact a PBA financial advisor to ensure your business is adequately covered.