What is employer’s liability insurance?
Employer’s liability insurance can help protect your business if an employee or their family files a lawsuit related to a workplace injury or illness that isn’t fully covered by workers’ compensation insurance.
While workers’ compensation helps cover medical costs and wage replacement, it doesn’t protect employers from every type of legal claim tied to an incident.
This coverage is often included in standard workers’ compensation policies, and is typically referred to as “Part Two” of those policies. However, in monopolistic states—such as Ohio, North Dakota, Washington, and Wyoming—businesses need to purchase employer’s liability insurance separately because workers’ compensation is provided exclusively through state funds.
For more information on how these coverages work together—along with their key differences—review our workers’ compensation vs. employer’s liability guide.
What does employer’s liability insurance cover?
Employer’s liability insurance typically applies when a business faces a lawsuits that arises after a workplace injury or illness, even when the workers’ compensation claim has already been handled.
Without employer’s liability coverage, a business would be responsible for paying the majority of the associated legal expenses out of pocket.
The four main types of claims that employer’s liability insurance can help cover are:
Third-party-over claims: A third party is sued by an injured employee, and the third party then sues the employer, claiming that unsafe conditions contributed to the injury.
Loss of consortium claims: A family member of the injured employee sues on the grounds that the injury has affected their relationship with the employee.
Dual capacity suits: An employer is sued in a second role—such as the manufacturer of equipment or owner of a property—with the claimant arguing the injury occurred because of that additional capacity.
Negligence or unsafe conditions: An injured employee alleges that the employer knowingly allowed unsafe working conditions that contributed to their injury.
When and why do businesses need employer’s liability coverage?
When employers need it
Most businesses with employees carry employer’s liability insurance, whether it’s included automatically in their workers’ compensation policy or purchased separately:
Any business with employees should have this coverage. Even with a strong safety program, lawsuits can happen.
Businesses in industries with relatively high workplace injury risks can especially benefit due to the likelihood of severe injuries—and potential legal action.
It must be purchased separately in monopolistic states, where workers’ compensation insurance doesn’t include employer’s liability.
Why employers need it
Employer’s liability coverage plays a critical role alongside workers’ compensation because:
Workers’ compensation doesn’t necessarily cover legal exposure tied to an injury.
Claims from spouses, dependents, or third parties can occur even after a workers’ compensation claim is resolved.
Attorney fees, settlements, or judgments can create major financial strain without liability protection.
Related resources
Workers’ compensation insurance costs
Workers' compensation insurance is required in most states. Learn how much it costs and what contributes to that cost.
Excess workers' compensation
Excess workers’ compensation provides protection when claims exceed the retention level of your self-insured program.
Understanding workers' compensation settlements
This employer guide can help you learn more about workers’ compensation settlements, how the process works, and the employer’s role in resolving claims fairly.