Employers liability insurance is Part Two of the standard workers compensation policy (form WC 00 00 00 C), and it defends and pays lawsuits over work-related injuries that fall outside the workers compensation law. Where Part One pays statutory, no-fault benefits with no policy limit, Part Two responds when the employer is sued for damages, most often through third-party action over, loss of consortium, consequential bodily injury, and dual capacity claims. Standard limits are $100,000 each accident, $500,000 disease policy limit, and $100,000 disease each employee.
Most employers never read past Part One. That is a mistake, because the claims Part Two exists for are rare but expensive, and they land squarely on the employer rather than the benefits system.
Employers Liability Insurance
Employers liability insurance protects an employer against lawsuits for work-related injuries and occupational diseases that are not covered under a state's workers compensation law. It is written as Part Two of the workers compensation policy, subject to the limits shown in Item 3.B of the Information Page.
What is employers liability insurance?
Employers liability insurance is the coverage in the workers compensation policy that responds when an employer gets sued over a work-related injury instead of simply paying statutory benefits. The workers compensation system rests on the exclusive remedy bargain: the employee receives prompt, defined, no-fault benefits and gives up the right to sue the employer in tort.
That protection is real but not airtight. It varies by state, some states recognize exceptions that let an injured worker sue anyway, and it never bound the people who were not party to the bargain in the first place, such as a spouse, a child, or a third party dragged into the loss.
Employers liability insurance fills that space. Part One defends suits for benefits, while Part Two defends suits for damages, and that one word is the whole difference. These claims are infrequent, but they tend to be high-dollar losses when they pay, and the direct defense obligation is as valuable as the indemnity.
Coverage applies to bodily injury by accident or bodily injury by disease, including resulting death, subject to conditions worth knowing. The injury must arise out of and in the course of employment in a state listed in Item 3.A of the Information Page. Bodily injury by accident must occur during the policy period. For disease, the last day of exposure to the causing conditions must fall during the policy period. The suit must be brought in the United States, its territories or possessions, or Canada.
What does employers liability insurance cover?
Employers liability insurance covers the damages an employer is legally required to pay for employee bodily injury claims that the workers compensation statute does not reach, plus the defense of those suits. The policy names four claim types, and because the form says these "include" the listed categories, the list is illustrative rather than exhaustive. All four are typically excluded under the CGL and business auto policies, which is why Part Two is the only place they live:
| Claim type | Who sues the employer | Typical scenario |
|---|---|---|
| Third-party action over | A third party the injured employee sued | Employee hurt on a machine sues the manufacturer, and the manufacturer sues the employer back for poor maintenance |
| Care and loss of services | The employee's spouse or children | Spouse sues for lost household services and companionship after a serious injury, the loss of consortium claim |
| Consequential bodily injury | A family member with their own injury | Spouse suffers a nervous breakdown from the stress of weeks at the hospital |
| Dual capacity | The injured employee | Employee hurt by a saw their employer manufactured sues the company as manufacturer, not as employer |
Third-party action over is the one brokers see most, and it has a contract wrinkle. If the third party has an indemnification or hold harmless agreement with the employer and the suit comes back through that contract, the general liability policy responds as an insured contract. The working rule: insured contract in place, look to the CGL. No contract, look to Part Two. Dual capacity is narrower than it sounds because many states simply do not allow those suits.
What is the difference between employers liability and workers comp?
Workers compensation and employers liability are two separate types of insurance sold together in one policy, and they behave nothing alike. Part One incorporates the state statute by reference, pays benefits on a no-fault basis, carries no standard limit of liability, and has no exclusions because the workers compensation law itself defines what is and is not paid. Part Two pays tort damages only when the employer is legally liable, is capped by the Item 3.B limits, and carries 12 exclusions. The differences line up like this:
| Feature | Part One (workers compensation) | Part Two (employers liability) |
|---|---|---|
| Trigger | Compensable injury under state law | Lawsuit for damages outside the statute |
| Fault | No-fault | Employer liability must be established |
| Limit | None, statute controls | Item 3.B limits apply |
| Exclusions | None | 12 exclusions |
| Defense | Suits for benefits | Suits for damages |
One consequence trips people up at claim time. The employers liability limits do not erode by anything paid under Part One, because the two coverages are separate. A $2,000,000 medical and indemnity claim under Part One leaves the full Part Two limit intact for the consortium suit that follows it.
What are the standard employers liability limits?
The standard employers liability limits are $100,000 bodily injury by accident each accident, $500,000 bodily injury by disease policy limit, and $100,000 bodily injury by disease each employee, all shown in Item 3.B of the Information Page. Employers liability insurance cost is folded into the workers compensation premium rather than charged as a separate line item, which is why buyers rarely notice what the limits actually are.
The disease limits work as a pair. If several employees develop respiratory illness from the same chemical exposure, no single employee collects more than $100,000 and the insurer pays no more than $500,000 across all of them for the policy term. Once the applicable limits are exhausted, the insurer pays nothing further and owes no further defense.
Those numbers have not moved in decades, and they are too low for any employer with real payroll. The fix is cheap. Because the exclusive remedy keeps claim frequency down, the charge to increase limits to $500,000 or $1,000,000 is a small percentage of premium, and nearly every umbrella carrier requires $1,000,000/$1,000,000/$1,000,000 as underlying before the umbrella or excess policy will sit over the account. Quoting increased limits should be the default, not an option.
What does employers liability insurance exclude?
Part Two carries 12 exclusions, and the pattern behind most of them is that another policy or another law is meant to respond. Contractual liability is excluded, so assumed liability belongs to the CGL or business auto policy. Punitive or exemplary damages are excluded, which is a deviation worth flagging because the unendorsed CGL and business auto forms carry no such exclusion.
Employment-related practices claims, including demotion, harassment, discrimination, and termination, are excluded and need a separate EPLI policy. Also excluded: injury to an employee employed in violation of law with the insured's knowledge, intentional injury caused by the insured, injury outside the coverage territory except for temporary assignments, fines and penalties, and obligations under Part One itself.
The federal exclusions form their own cluster. Work subject to the Longshore And Harbor Workers Compensation Act, the Federal Employers Liability Act, the Defense Base Act, the Outer Continental Shelf Lands Act, the Federal Mine Safety And Health Act, and the Migrant And Seasonal Agricultural Workers Protection Act is excluded, along with injury to masters and crew members of vessels.
Most of these can be bought back by endorsement when the exposure exists. A contractor sending a crew onto a pier or a vessel has a Part Two gap until someone endorses it.
When do you need employers liability coverage outside the standard policy?
Two situations leave an employer without Part Two even when workers compensation benefits are fully in place. The first is payroll in a monopolistic state. North Dakota, Ohio, Washington, and Wyoming sell workers compensation only through their state funds, those funds pay statutory benefits and nothing else, and monopolistic states never appear in Item 3.A of a standard policy. The answer is stop gap coverage, a CGL endorsement that carves employers liability back in for the scheduled states. Our guide to the monopolistic states walks through the placement mechanics.
The second is workers exempt from the statute. States exempt various employments from workers compensation law, commonly domestic workers, some agricultural workers, real estate agents, casual laborers, and employers below a numeric employee threshold. An exempt worker never gave up the right to sue, so the exclusive remedy offers no shield against them.
Voluntarily purchasing coverage, or adding the Voluntary Compensation And Employers Liability endorsement (WC 00 03 11 A) for exempt occupations, brings those workers inside the system and the employer inside its protection. A small employer who skips coverage because the statute allows it keeps the full tort exposure the statute was designed to remove.
Frequently asked questions
Is employers liability insurance included in workers comp?
Yes. The standard NCCI policy is the Workers Compensation And Employers Liability Insurance Policy, and employers liability is Part Two of that single form. You do not buy it separately unless you operate in a monopolistic state, where the state fund provides no employers liability and you add stop gap coverage to your general liability policy instead.
How much employers liability coverage do I need?
Carry at least $1,000,000 each accident, $1,000,000 disease policy limit, and $1,000,000 disease each employee. That is the underlying requirement most umbrella carriers impose, and the cost above the standard $100,000/$500,000/$100,000 limits is a small percentage of premium. Construction contracts also routinely specify $1,000,000 employers liability limits.
Does employers liability insurance cover discrimination or wrongful termination lawsuits?
No. Part Two excludes employment-related practices, including coercion, demotion, harassment, discrimination, defamation, and termination. Those claims need a separate employment practices liability insurance (EPLI) policy. Employers liability covers bodily injury claims that fall outside the workers compensation law, not personnel decisions.
Can an employee sue their employer if workers comp paid the claim?
Usually not directly, because the exclusive remedy bars most employee suits in exchange for guaranteed benefits. But exceptions vary by state, dual capacity suits are allowed in some states, and family members and third parties were never bound by the bargain at all. Those are exactly the suits employers liability insurance defends.
This guide is for educational purposes and summarizes standard NCCI policy language. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.
