What is the Difference Between Workers’ Comp and Employer’s Liability?

Understanding the basics of workers’ compensation and employer’s liability is the best way to differentiate the two.

As workers’ comp attorneys, we are often asked the difference between the two, so you are not alone if you are not sure yourself.

Both workers’ compensation and employer’s liability deal with injuries in the workplace and the compensation received by the injured employee.

In this article, we will break down both matters, provide different examples for each, and give an in-depth overview of how they differ.

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What is Workers’ Compensation?

Workers’ compensation, also known as workers’ comp, is a form of no-fault insurance.

It is purchased by employers and provides medical benefits and wage replacement to employees who were injured while working or in the workplace. In a workers’ compensation case, the employee does not have to show that the employer’s negligence caused their injury.

In exchange for medical benefits and wage replacement, the injured employee gives up their right to sue their employer for negligence.

Workers’ compensation insurance can cover more than just medical care and income replacement. It can also include compensation for permanent injuries and retraining costs, but it does not cover pain and suffering.

Income replacement is typically 2/3s of the employee’s current salary or income, but there is a fixed maximum amount that benefits will not exceed.

These benefits are not taxed and usually begin quickly after an injury on the job.

Many different types of employers can be covered by workers’ compensation insurance such as; volunteers, business owners, independent contractors, farmers, and more.

Workers’ compensation is mandated by each state and can vary based on the type of injury or illness. In the state of Missouri, any company with five or more employees must carry workers’ compensation insurance. The only exception is in the construction industry, in which you much have workers’ compensation insurance if you have one or more employees.

Here is a simple example of a workers’ compensation case.

A waitress trips and falls while serving food at a restaurant. As a result of the fall, she broke her ankle. Her medical expenses to treat the broken ankle are $2,400. She also missed a month of work while her ankle was healing, resulting in a loss of $4,000 in income. Workers’ compensation would cover $6,400 for the medical expenses and loss of wages.

What is Employer Liability?

Employer liability insurance is a type of business insurance that can cover compensation costs and legal fees if an employee files a lawsuit for injury or illness caused by their work.

An example of employer liability would be:

• A manager tripped over a cable in their office, causing a severe injury.
• The injured manager then hires a workers’ compensation lawyer and files a compensation claim against the employer.
• The court rules that the employer needs to pay costs for injury and compensation.

Employer liability insurance would cover not only the compensation amount but also the legal fees accrued during the lawsuit.

Employers’ liability comes into play when there is a possible lawsuit. It covers four major types of claims: third-party over actions, loss of consortium, dual capacity suits, and consequential bodily injury.  Once in court, the employee must show that the employer was negligent in receiving any additional benefits.

Third-Party Overactions and Employer Liability

Third-party overactions is when a third party files a lawsuit because they are being held liable for an employee’s injury. For example, a construction worker was using a piece of equipment that the employer did not maintain properly. The poorly maintained equipment injures the employee and the employee sues the manufacturer of the equipment. In return, the manufacturer sues the company for contributory negligence for their failure to maintain the equipment.

Loss of Consortium and Employer Liability

Loss of consortium is a claim for damages suffered by a family or spouse of an employee who was injured or killed because of negligent or intentional acts.

Dual Capacity Suits

This type of suit is when the employee sues the employer as a product supplier, owner of premises, or provider of service.

Consequential Bodily Injury

In this type of suit, a member of an injured employee’s family claims to have an injury that is a direct result of the employee’s injury.

Overall, most employers must have employers’ liability coverage to cover these potential types of claims. The cost of employers’ liability insurance depends on the type of business and the number of employees.

So What is the Difference Between Workers’ Compensation and Employer’s Liability?

When a company purchases workers’ compensation insurance, they are also purchasing employer’s liability insurance.

Put simply, workers’ compensation is the benefits an employee receives when they are injured at work. Employer’s liability is insurance an employer uses if an employee files a lawsuit against them because of workplace injuries.

They are both typically purchased together under a company’s overall business insurance policy. Workers’ compensation covers statutory obligations that are covered under a state’s specific compensation laws. Employers’ liability provides coverage when an employee does not feel that the workers’ comp policy provides adequate coverage and that the employer was negligent.

For example, a factory worker believes that he needs a steel step stool to do his job.

The employer disagrees and thinks a wooden step stool is better and requires that a wooden step stool is used. The factory worker uses the wooden step stool and it breaks, resulting in severe injury. After filing a workers’ compensation claim, the factory worker believes that he is not being properly reimbursed. He files a claim against his employer, claiming that the employer was negligent because he was required to use a wooden step stool. Employers’ liability would cover the costs of the claim.

Workers’ Comp vs Employer’s Liability From an Employee’s Point of View

If you have been injured or sick due to work, it is important to report the injury or illness to an employee or supervisor immediately. Typically, the time frame to report an injury or illness is within 30 days to potentially receive any workers’ compensation benefits.

If you feel like you were mistreated by an employer after a work injury, speak with a work injury attorney today.

Related Workers’ Comp Material

• Construction workers and workmans’ compensation
• Common injuries in workers’ comp lawsuits 
• 8 of the most unusual workers’ compensation lawsuits