What’s the difference between employer’s liability and workers’ compensation insurance?

Workers’ compensation insurance is designed as no-fault coverage. That means employees can receive benefits for a covered work-related injury or illness without having to prove negligence. Workers’ compensation typically helps cover the injured employee’s medical expenses, lost wages, and ongoing care, supporting them while helping your business avoid lengthy legal disputes.

But some situations fall outside of what workers’ compensation pays for, which is why you may need employer's liability insurance even if you have a workers' compensation policy.

Often included as “Part Two” of a standard workers’ compensation policy, it helps cover legal defense costs, settlements, or judgments if an injured employee—or a third party connected to the incident—files a lawsuit against your business.

While every workplace injury is unique, employer’s liability insurance often applies in scenarios like:

• Third-party claims: If an employee is injured using an outside contractor’s equipment, the contractor may be sued and then seek compensation from your business as part of a third-party-over action.

• Loss of consortium suits: Family members of an injured employee may file a lawsuit for the impact the injury has on their household.

• Dual-capacity suits: If your business manufactures a product and an employee is injured by it, they may sue you in your role as a manufacturer—not just an employer.

• Allegations of negligence: Claims tied to unsafe conditions or inadequate training can fall outside standard workers’ compensation benefits, leading to additional liability.

In these cases, employer’s liability helps cover the legal costs associated with defending your business.

Many employers already have employer’s liability included in their workers’ compensation policy, but it’s still important to understand your limits, state requirements, and risk exposure.

Here are a few steps to consider:

Most workers’ compensation policies include employer’s liability as Part Two coverage. Confirm what’s included and whether your business needs higher limits.

Higher-risk industries, such as construction, manufacturing, and trucking, may benefit from increased liability protection.

Businesses in monopolistic states (Ohio, North Dakota, Washington, and Wyoming) must purchase employer’s liability coverage separately, since state-run systems provide only the workers’ compensation portion.

An experienced insurance provider can help you evaluate your exposure, understand how both coverages work together, and help ensure your business is properly protected.