Injuries employees sustain on the workplace premises or anywhere else while the employee is acting in the “course and scope” of employment are covered by their employer’s workers’ compensation insurance. The standard workers’ compensation policy has two parts, “Part One, Workers Compensation” and “Part Two, Employers’ Liability.”

Under “Part One”, the insurer contracts to pay the statutory workers’ compensation benefits established by the individual state(s) covered by the policy. Unlike other types of insurance, workers’ compensation coverage has no establish policy limit or “coverage ceiling” on the policy amount. Essentially, the employer transfers their entire statutory obligation to the insurance carrier through the purchase of a workers’ compensation insurance policy. The burden of claim payment is now the responsibility of the insurance carrier accepting the transfer.

“Part Two” of the policy provides coverage for an employer who is sued by an employee for work-related bodily injury or illness that isn’t subject to state statutory benefits. The “Employers’ Liability” section of the policy does have an established coverage limit. It is critical to ensure that the “Employers’ Liability” limit being carried “satisfies” the underlying policy limit requirements of the commercial umbrella policy. If the Employers’ Liability limit and the commercial umbrella “underlying requirements” do not match (i.e. your limit is too low), the employer will end up “self-insuring” the coverage limit difference between what they should have carried and what they actually are carrying.

Employers’ liability also insures an employer in some other situations. One is so-called “third-party over suits,” where an injured worker files suit against someone other than the employer (a third party) and that third party then seeks to hold the employer responsible. For example, an employee injured while working with a machine might file suit against the manufacturer of the machine. The manufacturer might then sue the employer claiming that the cause of the injury was modifications the employer made to the machine or improper use. Another situation where this liability coverage applies is when the spouse of an injured worker sues the employer for loss of consortium.

Employees are entitled to receive compensation for an “injury by accident” or an “occupational disease.”

In order to be covered, an “accident” must:

  1. Occur at work or during a work-related function.
  2. Be caused by a specific work activity.
  3. Happen suddenly at a specific time. (Injuries incurred gradually or from repetitive trauma are not covered, although certain diseases caused by repetitive trauma are covered.)

In order to be covered, a disease must:

  1. Be caused by the work.
  2. Not be a disease of the back, neck, or spinal column.