Employer’s Liability Insurance (EPLI) Vs. Workers' Compensation Insurance: Similarities and Differences

What are the Similarities and Differences Between Employer’s Liability Insurance and Workers' Comp. Insurance?

Depending on the type of business you run, you will have to purchase some insurance policies to protect your business. Aside from the regular business insurance, other common types of insurance you will hear about are employer’s liability insurance and workers’ compensation insurance. The main difference between this two is that employer’s liability insurance is a type of workers’ compensation insurance.

Both employer’s liability and workers’ compensation insurance protect your business from the weight of medical expenses and lawsuits when employees get injured at work. Note that employer’s liability insurance is different from employment practices liability insurance. We will explain the difference between EPLI and employers’ liability later in this article.

Workers’ Compensation Insurance

As we discussed in this post, workers’ compensation insurance is an insurance policy that covers the cost of medical expenses should your employees get injured while discahrging their duties at work. It also provides you protection against lawsuits in case the accident was due to the company’s negligence. In almost every state, employers are required to carry workers' compensation insurance, even if you have just one employee.

This insurance covers medical expenses, lost wages during the recovery period, permanent disability benefits, and even funeral expenses if the employee dies from a work-related accident or illness.

Workers’ compensation insurance usually requires that employees give up their right to sue the company. This system protects both parties: employees get reliable coverage, and employers are protected from potentially large damage verdicts. But this does not make your business immune to lawsuits: if the accident occurred due to negligence by management, the affected employee could still sue for punitive damages, as well as compensation for their pain and suffering. This is where employer’s liability insurance comes in.

Employers’ Liability Insurance (EPLI)

Employers’ liability insurance works alongside workers’ compensation insurance. It covers the business's legal costs and damages if it is sued for negligence related to a workplace injury or illness. So, if an employee sues because they think that your negligence caused their injury, your employer’s liability insurance policy may help pay your legal costs.

Unlike workers’ compensation insurance, this policy often comes into play when there is a question of negligence. In essence, employer’s liability insurance offers you more protection than worker’s compensation does.

Businesses in high-risk fields, such as trucking, cargo loading, electrical contracting, staffing, and nursing homes, typically benefit tremendously from carrying an employers’ liability insurance policy. When an employee directly sues your company, an employer’s liability covers your legal expenses, but that is just one of the many scenarios in which this policy could protect. You may face a few different forms of litigation.

Other Ways Employers’ Liability Can Help Protect Your Business

1. Third-party-over action lawsuits: A third-party-over action lawsuit is a legal claim where an injured employee, after receiving workers' compensation from their employer, sues a third party whose negligence contributed to the injury. The "over" part happens when the third party uses a contractual agreement (like an indemnity clause) to shift the liability back to the employer, making the employer potentially responsible for the third party's losses.

For example, if a workplace machine is old and should have been replaced, but the employer refuses to change it until it injures an employee, the employee can file a lawsuit against the equipment manufacturer. The manufacturer may sue the employer for failing to retire the machine.

2. Dual-capacity lawsuits: If your business makes a product that injures your employee, a dual-capacity lawsuit occurs when the employee sues the company as both an employer and manufacturer.

3. Loss of consortium lawsuits: The family members of an injured employee could file a loss of consortium lawsuit when their relative is badly injured, becomes seriously ill, or dies in a work-related accident. It seeks compensation for the loss of intangible benefits from the relationship, such as companionship, affection, intimacy, support, and household services that the injured person can no longer provide.

4. Consequential bodily injury lawsuits: While taking care of their injured loved one, or by reason of living in the same house, the employee's relative may become infected with the same health issue the employee is suffering or suffer a bodily injury in the process of caring for their loved one. That non-employee is at liberty to file a consequential bodily injury lawsuit over the pain they’re suffering.

Do I Need Both Workers' Comp and EPLI?

Which Worker's Insurance Policies Do You Need?

This is a choice that you really do not have to make, especially when you look at it closely. Workers’ compensation insurance is mostly mandatory by law, and it covers employers’ liability insurance. But aside from workers’ compensation being mandatory, your business may benefit tremendously by carrying both policies.

If your business involves the use of heavymachinery, physical handling of dangerous materials, frequent mobility, and situtaions that could potentially lead to injury or accident, our recommendation is you need both Workers' Compensation and EPLI because they cover different types of claims: Workers' Comp handles physical injuries and illnesses, while EPLI covers employment-related claims like wrongful termination and discrimination.

Employer’s Liability Insurance Vs. Employment Practices Liability Insurance

Another business insurance policy that might benefit your company is employment practices liability insurance. While employer’s liability insurance helps to pay for lawsuits over employee injuries, employment practices liability insurance, on the other hand, covers employment practices-related lawsuits. Also, EPLI does not come with your workers’ compensation coverage.

Specifically, employment practices liability insurance protects your business from allegations, including all kinds of employment discrimination, wrongful termination, or a hostile work environment. The similarity in both insurances is that they help protect your business from employee lawsuits.

How Much Does Employer’s Liability Insurance Cost?

When you’re looking to purchase employer’s liability insurance, you need to keep in mind that the cost will depend on the type of business you do and your workers’ compensation claims history.

Most insurance companies will consider the cost of your payroll and the kind of work your employees do. Generally, the lower the salaries or less risky the work, the better your chances of paying less for the policy.

Have More Questions About Workers' Insurance and Employer’s Liability Insurance?

If you have more questions about workers’ compensation or employer’s liability insurance, we are more than happy to help answer them. At The Mission, we look forward to using our profound insights and expert guidance to help you improve your productivity and cut down on liabilities. We are experts at assisting businesses to implement the best growth strategies successfully.

Also, as leading partners in the PEO, HR, payroll, and benefits outsourcing marketplace, we provide result-oriented services for small and medium-sized organizations and government contractors, serving as a trusted partner in integrated human resource compliance, risk management, employee benefits, employment practices liability insurance, and payroll processing. Contact us today for further assistance.