If you own a business and have employees, your state’s laws probably require your business to have workers’ compensation insurance. If your state’s laws don’t require your business to have workers’ compensation insurance, they may incentivize your business to have workers’ compensation insurance by barring lawsuits for work-related injuries against your business and limiting the business’s liability to the insurance coverage provided by workers’ compensation.
But this lawsuit bar and limitation on liability may not apply if your business was “grossly negligent”—a greater degree of negligence than ordinary negligence—and that gross negligence caused the employee’s injuries.
In most states, workers’ compensation pays medical expenses and lost wages to a worker who was injured or got sick on the job. But workers’ compensation does not cover all of the liability the employer of an injured worker may face following a workplace injury or illness. To insure against additional potential liability, an employer may purchase employers’ liability insurance (ELI) as part of the workers’ compensation insurance package, or as an additional insurance policy.
Most workers’ compensation policies include employers’ liability insurance—but in some states (North Dakota, Ohio, Washington, Wyoming) an employer must purchase ELI separately.
Employers’ liability insurance typically covers the following claims that may be made against the employer of an injured employee:
• Third-Party Over Actions. In this case, another party that was found liable for the employee's injuries may file a lawsuit against the employee’s employer. For example, if one of the employer’s employees was injured while using a piece of equipment or machinery, the employee may sue the manufacturer on a product liability claim—but the manufacturer might then sue the employee’s employer for failing to properly maintain the equipment or machinery.
• Loss of Consortium. The spouse of an injured employee may file a lawsuit against the employee’s employer for their losses related to the spouse’s injury or illness.
• Dual-Capacity Suits. An employee may file a lawsuit against their employer if an item the employer manufactures caused the employee’s injury.
• Consequential Bodily Injury. A consequential bodily injury claim may be made against the employer of an employee who has suffered a workplace injury or illness when a family member of the employee suffers bodily injury caused by the employee's injuries.
• Gross Negligence Claims. If a workplace manager or supervisor instructs an employee to do something the manager or supervisor knows is dangerous and could result in serious injury or death to the employee, that might constitute gross negligence—a greater degree of negligence than ordinary negligence—and workers’ compensation may not cover the injured employee’s claims against the employer.
In Texas, businesses with employees are generally required to carry workers' compensation insurance, which is regulated by the Texas Department of Insurance. This insurance provides medical benefits and income replacement to employees who suffer work-related injuries or illnesses. However, Texas is unique in that it does not mandate employers to have workers' compensation coverage, allowing employers to opt out or become 'non-subscribers,' in which case they lose certain legal protections and can be sued for negligence by injured employees. If an employer has workers' compensation insurance and an employee is injured due to the employer's gross negligence, the employer may still face liability beyond the workers' compensation system. Employers in Texas can purchase employers' liability insurance (ELI) as part of their workers' compensation policy to protect against additional liabilities such as third-party over actions, loss of consortium, dual-capacity suits, consequential bodily injury, and gross negligence claims. ELI provides coverage for these types of claims that are not typically covered by workers' compensation insurance alone.
