Explanation of Work Comp Coverage

 In Commercial Insurance

Explanation of Work Comp Coverage

If you have ever reviewed your workers compensation policy, you will note that Part I, Workers Compensation, applies to the laws of the State and does not specify a limit. This is because workers compensation applies to “benefits.” Workers compensation benefits are determined by the state, so coverage is virtually unlimited.

However, Part II, Employers Liability, does have a limit shown on the policy. EL applies to damages that the insured must pay, much like a general liability policy and hence, is subject to the limits shown.

Basically, EL is intended to protect an employer from legal liability arising out of employee injury, which is not covered by the workers compensation policy. Although coverage applies to all employers liability claims not specifically excluded, the policy does list the four most common types of claims:

” Third Party Over Actions – A lawsuit filed by a third party, seeking indemnity because it was held liable for an employee’s injury. Take, for example, an employee who was injured using a piece of machinery that the employer had not properly maintained. In addition to the benefits received under the workers compensation program, the employee also sues the manufacturer of the equipment. In turn, the manufacturer of the equipment sues the employer for contributory negligence due to poor maintenance.

” Loss of Consortium – A lawsuit typically filed by an injured employees spouse for loss of the “services” of his or her spouse who was injured in the course of employment.

” “Dual Capacity” Suits – Lawsuits brought by an injured employee, against the employer when the injury arises from a product the employer manufacturers. In such a case, the employer is liable not only as an employer but also as a manufacturer.

” Consequential Bodily Injury – A lawsuit filed by a family member for injuries suffered as a consequence of the employee’s injury. An example would be the spouse of a severely injured employee who suffers a heart attack or a nervous breakdown upon learning of the injury of his or her mate.

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