Employers Liability Insurance

Employers liability insurance is the part of a workers’ compensation policy that defends your business when an injured worker’s claim turns into a lawsuit. Workers’ comp pays the employee a fixed schedule of medical and wage benefits no matter who was at fault. That no-fault bargain leaves a door open, though: a spouse, a co-defendant, or the worker in a different legal capacity can still sue the company for negligence. This coverage, written as Part B of the policy, pays the defense lawyers and any judgment that follows. Most owners buy it without realizing it is a separate promise with its own dollar limits, and that those limits are often set far too low.

What employers liability insurance actually is

Workers’ compensation runs on a trade called the exclusive remedy. In exchange for guaranteed benefits, an injured employee gives up the right to sue their employer over the injury itself. That keeps medical bills and lost wages moving without a courtroom fight, which is good for both sides. The catch is that the system covers the worker. It does nothing for the company’s legal exposure to everyone else connected to the same accident, and that exposure can be larger than the injury claim itself. A single serious accident can generate a benefits claim and a separate lawsuit at the same time, and your workers’ compensation policy only answers the first one on its own.

Employers liability insurance fills the gap the exclusive remedy leaves behind. When someone files a negligence suit that workers’ comp benefits do not answer, Part B steps in. It funds the legal defense, expert witnesses, and any settlement or court award up to the limits on the policy. Think of comp benefits as the money that goes to the hurt worker, and employers liability as the shield that protects the business when a related lawsuit lands on the desk weeks later.

Because the two coverages travel together, the standard policy most carriers sell is titled a Workers’ Compensation and Employers Liability policy. The National Association of Insurance Commissioners (NAIC) publishes consumer guidance on how these combined policies are structured, and the form itself is nearly identical from state to state. If you carry workers’ comp, you almost certainly already own employers liability coverage. The only real question is whether the limits are high enough to matter when a claim arrives.

Part A and Part B: two promises in one policy

A workers’ compensation and employers liability policy is split into two parts that do very different jobs. Reading the split correctly is the single most useful thing an owner can do with the document, because the two halves behave nothing alike when a claim hits. One half is open-ended and pays the worker directly. The other half is capped and pays for lawyers and judgments. Owners who blur the two tend to assume the whole policy is unlimited, and that assumption is exactly where uncovered losses come from.

• Part A, workers’ compensation. This pays the statutory benefits your state requires: medical treatment, a percentage of lost wages, disability, and death benefits. Part A has no dollar cap. The insurer pays whatever the state’s benefit schedule demands for a covered injury.
• Part B, employers liability. This is the lawsuit coverage. It responds to negligence claims that fall outside the comp benefit schedule, and unlike Part A it carries specific dollar limits that cap what the insurer will pay.

That split matters because Part A is open-ended but Part B, the part that gets you a defense attorney, stops at the limits printed on your declarations page. If a jury awards more than those limits, the difference comes out of company assets. The fix is rarely complicated, but you have to know to look.

The four lawsuits Part B was built to answer

Employers liability coverage exists because resourceful plaintiffs found ways around the exclusive remedy. Four claim types come up again and again, and a complete policy answers all of them. None of these are exotic. Each one is a routine path that a plaintiff’s attorney can use to reach a business the worker could not sue directly, which is why the coverage is worth understanding in plain terms.

Third-party-over actions

This is the most common trigger. A worker is hurt on a machine, collects comp benefits, then sues the equipment manufacturer. The manufacturer turns around and sues your business, arguing your poor maintenance or training actually caused the injury. The worker could not sue you directly, but the third party can pull you in through the back door. Part B funds that defense and pays the share of damages assigned to you.

Loss of consortium

When an employee suffers a catastrophic injury, the spouse or children may sue for the loss of companionship, household help, and family support. These are separate claims brought by family members, not the worker, so the exclusive remedy that blocks the worker often does not block them. Employers liability responds to the family’s suit and the legal bills that come with it.

Dual capacity

A dual-capacity claim argues the company injured the worker while acting in a second role, not as the employer. The classic example is a manufacturer whose own employee is hurt by a product the company also sells to the public. The plaintiff says you owed me a duty as a product maker, separate from our employment relationship. Courts treat that second hat as fair game for a lawsuit, and Part B answers it.

Consequential injury

Here a family member’s injury flows from the original workplace accident. A spouse who develops a health problem while caring for a severely injured worker, for example, may bring a consequential claim. These suits are less frequent, but a complete employers liability policy still covers them rather than leaving the business to fund a surprise defense.

How the limits are written

Employers liability limits look strange the first time you see them because they come as three numbers, not one. A typical entry reads $100,000 / $500,000 / $100,000. Each number caps a different kind of claim, and they do not share a single pool of money. Reading them in order tells you exactly how much defense and judgment money the policy will produce for each scenario, which is information you want before a claim, not after.

• $100,000 bodily injury by accident, each accident. The most the insurer pays for liability arising out of any one accident.
• $500,000 bodily injury by disease, policy limit. The aggregate cap for all disease-related liability claims during the policy term.
• $100,000 bodily injury by disease, each employee. The most paid for any single employee’s disease claim.

Here is a worked example. Suppose a third-party-over lawsuit produces a $400,000 judgment against your business after a single workplace accident. With a $100,000 per-accident limit, the insurer pays $100,000 and your company is on the hook for the remaining $300,000. Raise that first number to $1,000,000 and the same judgment is fully covered with room to spare. That gap is the entire reason limits deserve a second look.

The good news is that higher limits are cheap. Carriers price the base $100,000 / $500,000 / $100,000 limits into nearly every policy, and moving up to $1,000,000 limits usually adds only a small percentage to the premium. For most businesses the extra cost is a few dollars a month against a six-figure swing in protection. A certificate of liability insurance will show these limits, so review them before you sign a contract that requires specific amounts.

What employers liability insurance costs

You rarely buy employers liability on its own, so its price is folded into the workers’ comp premium. That premium is driven by three things: your payroll, your industry classification code, and your claims history. The National Council on Compensation Insurance (NCCI) sets the classification codes and rate guidance that most states use, which is why a roofing crew pays far more than an accounting office for the same coverage. The riskier the work, the higher the rate per $100 of payroll.

Benchmark numbers help set expectations. Across U.S. small businesses, workers’ compensation, which bundles employers liability, runs about $94 per month, or roughly $1,128 per year, based on 2025 pricing data. Progressive Commercial reported a 2025 national median closer to $76 per month. Your own number depends heavily on payroll size and risk class, but those figures frame the range for a typical small employer rather than a single quoted price.

Because employers liability limits sit inside that premium, raising them is one of the cheapest risk upgrades available. Workplace injuries remain common; the U.S. Bureau of Labor Statistics (BLS) counts millions of nonfatal workplace injuries and illnesses every year, and any serious one can spawn the kind of related lawsuit Part B was built for. Spending a little more to lift the limits from $100,000 to $1,000,000 is a rational trade for most owners who carry real lawsuit risk.

Employers liability next to your other policies

Employers liability is easy to confuse with the other liability coverages a business carries, because the names overlap. The table below lines them up by the question each one answers, which is the fastest way to see where employers liability begins and ends. Each policy protects a different group of people, and none of them substitutes for another.

Read across the rows and the boundary becomes clear. Workers’ comp pays the worker, employers liability defends the company against suits connected to that worker, general liability handles outsiders, and employment practices liability covers conduct claims that have nothing to do with a physical injury.

The monopolistic-state trap

This is where many businesses discover a hole they did not know they had. In four states, workers’ compensation must be bought from a government fund rather than a private insurer. These monopolistic states are Ohio, North Dakota, Washington, and Wyoming. The Ohio Bureau of Workers’ Compensation (BWC), for instance, sells the comp benefits directly to employers, and a private carrier cannot write the base policy there.

The catch is that state-fund policies usually cover only Part A. They pay the worker’s statutory benefits but leave out the Part B employers liability piece entirely. An employer in one of these states can be fully compliant on comp and still have zero coverage for a third-party-over or loss-of-consortium lawsuit. The compliance paperwork looks complete, which is exactly what makes the gap dangerous.

The fix is a stop-gap endorsement. You add it to your commercial general liability policy, and it restores the employers liability coverage the state fund omits. If your business operates in Ohio, North Dakota, Washington, or Wyoming, confirm that a stop-gap endorsement is in place. Without it, the lawsuit protection most owners assume they have simply is not there when a claim arrives.

What employers liability insurance does not cover

Part B is built for bodily-injury lawsuits tied to employment, which means several large exposures fall outside it. Knowing the gaps keeps you from leaning on the wrong policy when a claim comes in. Each exclusion below has its own home in a different coverage, so the goal is to make sure nothing important falls between policies.

• Intentional or illegal acts. Coverage does not extend to injuries the employer caused on purpose or to violations of the law.
• Fines and penalties. Civil and regulatory penalties, including those tied to safety citations from the Occupational Safety and Health Administration (OSHA), are not insurable losses.
• Employment practice claims. Discrimination, harassment, and wrongful termination are not bodily-injury claims, so they belong to a separate policy. That is the job of employment practices liability insurance (EPLI), not employers liability.
• Obligations under federal acts. Maritime workers and certain federal employees fall under separate laws and need specialized coverage rather than the standard Part B form.

The U.S. Department of Labor administers several of those federal programs, and its rules govern who needs specialty coverage instead of, or alongside, a standard policy. When in doubt, an agent can map your workforce to the right combination so no group of workers is left outside every policy.

Who needs employers liability insurance

If you have employees, you need this coverage, and in most states you already carry it the moment you buy workers’ comp. The real decision is about limits and add-ons, not whether to have it at all. A few situations call for extra attention, and they tend to be the ones where a low limit does the most damage.

Businesses with contracts often face limit requirements written into the agreement. A general contractor, a hospital, or a municipality may demand $1,000,000 employers liability limits before letting you on site, and a certificate showing only $100,000 can stall the job. Companies that work across state lines need to watch for monopolistic-state operations that require a stop-gap endorsement. And firms with high-hazard work, where a serious injury and a follow-on lawsuit are more likely, benefit most from raising the per-accident limit early rather than after a claim.

Employers liability sits alongside the rest of a commercial program. It pairs with general liability, which covers injuries to customers and the public, and with a broader package such as a small business insurance policy that bundles property and liability together. Each policy answers a different question; employers liability answers the one about lawsuits arising from a worker’s injury, and it is the piece most owners forget to size correctly.

How to review or raise your coverage

Start by pulling your current workers’ comp declarations page and finding the three employers liability limits. If they read $100,000 / $500,000 / $100,000, you are on the base limits, and a quick call to your agent can price the move to $1,000,000. The increase is usually modest enough that most owners take it once they see the gap a low per-accident limit leaves behind.

Next, check your operating states against the monopolistic list, and confirm a stop-gap endorsement wherever it applies. Then make sure your overall program has no overlap or hole between employers liability, general liability, and EPLI. If your business is still assembling its coverage, our guide on where to get workers’ compensation insurance walks through buying the policy that carries this protection. A short annual review keeps the limits matched to your payroll and your contracts, and it costs nothing but a phone call.

Frequently asked questions