We get this question a few times a week because most business owners don’t quite understand their workers compensation limits. They try to compare them to their general liability limits and that is where some of the confusion sets in. The Limits on your workers’ compensation insurance policy provide coverage for a business against lawsuits arising from employment-related injuries or illnesses. For example, if an injured employee is not satisfied alone with medical and loss of wage benefits because they feel their employer purposefully put them in harm’s way on the job or were grossly negligent, and as a result they were injured, they may sue for punitive damages. In some cases, even the employee’s family can sue for the same damages. This is where Part II of a workers’ comp policy would kick and provide coverage.
It is important to note that employers’ liability coverage is limited, unlike medical benefits or loss of wages. This is the spot that a lot of business owners or anyone starts to get confused. They see limits on their workers’ compensation policy and naturally think that is the max that would be paid in an injury scenario. A workers’ compensation policy will pay out whatever it takes to rehabilitate an injured employee. Employers liability or Part II will not pay out unlimited amounts on behalf of employers who were charged with gross negligence or knowingly placing their employees in harm’s way. Employers’ liability coverage in most states starts at $100,000 each employee, $100,000 each accident and at $500,000 per policy limit for disease- these limits are statutory or minimum limits that come with the purchase of a policy. These coverage limits can be raised for a nominal additional premium percentage on most policies. Many businesses opt for increased employers’ liability limits. They do this because of a need for peace of mind or because their work contracts often require higher limits than statutory requirement.
To give you an idea on how these limits work, think about it in this manner. An employee working in a manufacturing plant is exposed to lead on a daily basis. The employer does not have proper ventilation or does not always check on the employee to make sure they are wearing proper attire. Whether that is long sleeve shirts and pants or to have a respirator so they are filtering the air quality they are breathing. The employee gets injured on the job after many years of never missing work. It is also discovered that they have come down with a serious illness that may be caused by years of lead exposure. The employee and his family are not satisfied with the level of benefits workers compensation is providing and has decided to sue the Employer for negligence. This is where the limits in Employers Liability or Part II would kick in. There are many other scenarios that could come into play outside of illness, but this is just one example of how a 3rd party may potentially bring suit against your company. The best thing to do is always be proactive with safety, etc. which can be hard for a small business. Because your time is very invested in the day to day activities of the business.