What Is Employers' Liability Insurance?
Employers' liability insurance (sometimes known as employment practices liability insurance [EPLI]) protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths not covered under workers' compensation.
Employers' liability insurance is also called “part 2” of a workers’ compensation policy.
Important:Because workers' compensation laws don't cover all workers or injuries, an injured worker may sue their employer for work-related
injuries; employers' liability coverage provides protection for the employer.
How Employers' Liability Insurance Works
Most employees are covered by workers' compensation laws established at the state level (federal employees work under federal workers' compensation laws). States require most employers to carry workers' compensation insurance.
Workers' compensation provides some level of coverage for medical expenses and lost wages for employees or their beneficiaries when an employee is injured, sickened, or killed as a result of their job. There is no need for the employee to sue the employer to establish fault to qualify for workers' compensation. However, if an employee feels that workers' compensation does not adequately cover their loss—perhaps because they feel their employer’s negligence caused their injury—they may decide to sue their employer for punitive damages such as pain and suffering.
Employers' liability coverage is designed to cover expenses not covered by workers' compensation or general liability insurance. In the event of a payout under an employers' liability insurance policy, an employer can help limit their losses by including, as a condition of the payout, a clause that releases the employer and their insurance company from further liability related to the incident in question.
Key Takeaways
•Employers' liability insurance protects the employer if a worker is not covered by workers' compensation or if they decide to sue the employer.
•A company purchases employers' liability insurance when it buys workers' compensation.
•Employers' liability insurance places limits on the amounts paid out per employee, per injury, or per illness.
The Limits of Employers' Liability Insurance Policies
Even with adequate employers' liability insurance coverage, claims can become complicated and costly for employers, particularly in the case of a lawsuit. The cost of defending against such a suit itself can be a major financial loss.
For this reason, many organizations choose to carry employment practices liability insurance (EPLI) to help cover the costs of defending the organization from a lawsuit. A claim may be legitimate or not, but even so, many businesses cannot accept that level of risk and ensure against it.
EPLI covers employers against employee claims alleging discrimination (for example, based on sex, race, age, or disability), wrongful termination, harassment, and other employment-related issues such as failure to promote.
Furthermore, if an employer intentionally aggravates an employee’s work-related injury or illness, employers' liability insurance will not cover the employers' financial obligations to the employee, and the employer will have to pay the employee if the employee wins in court. Employers' liability insurance policies also place limits on what they must pay out per employee, per injury, and per illness. These limits might be as low as $100,000 per employee, $100,000 per incident, and $500,000 per policy. In addition, this insurance does not cover independent contractors.
Special Considerations: Policy Exclusions
EPLI coverage does not cover every situation. Typically, exclusions include criminal acts, fraud, illegal profit, or advantage, purposeful violation of law and claims arising out of downsizing, layoffs, workforce restructurings, plant closures or strikes, mergers, or acquisitions.
In the case of punitive damages, many states rule out allowing insurers to compensate against them. However, many EPLI policies provide punitive damages through the "most-favored jurisdiction" clause. The clause specifies that punitive damages coverage will be regulated by the state law that favors insuring against punitive damages. For example, if a company has business operations in many states and a claim arises in the state where punitive damages coverage is excluded if the company was established in a state that supports punitive damages coverage, then the company can get coverage under its EPLI policy.
Builder's risk insurance is a special type of property insurance which indemnifies against damage to buildings while they are under construction.[1] Builder's risk insurance is "coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause."[2] Buildings are subject to many different risks while under construction. They may catch fire, be damaged by high winds, or fall victim to other force majeure. A principle of common law is that any new construction or other improvement to land becomes property of the owner of the land - the title holder - once there has been an "improvement" to the owner's site. Builder's risk insurance indemnifies against some of these losses.
Coverage
Builder's risk covers perils such as fire, wind, theft and vandalism and many more. It typically does not cover perils such as earthquake, flood or hurricane damage unless the policy has been specifically endorsed to do so.[3] However, earthquake riders can be very economical, depending on where your project is located and should be considered. These policies also do not cover accidents and injuries at the workplace.[4] and is intended to terminate when the work has been completed and the property is ready for use or occupancy. If you are going to properly setup your policy, coverage should be effective prior to when the materials are delivered to the job site. Coverage ends upon the earlier of closing of the sale, occupancy or the policy expiration date. After builder risk coverage expires, due to sale or occupancy, the new owner should take out permanent property insurance on the building such as a home owner's policy or a commercial property policy.
Insurance costs generally run between one and four percent of the construction cost, depending upon the type of insurance purchased and exclusions from coverage.[5]
Who Buys Builder's Risk Insurance?
Coverage is often purchased by the custom builder or general contractor and may also be purchased by the property owner. Builder's risk coverage may be necessary to show proof of insurance to comply with local city, county, and state building codes and is often required as a condition to many contracts. However, many architects believe that it is the property owner who should have the builder's risk policy, because they have already paid for the improvements to their land, and if the builder receives the funds directly from a claim, theoretically, he/she could abscond with that benefit. It is far safer for the property owner to obtain the builder's risk policy, because they already own the building, even while it is under construction. If something happens to the under-construction project, then they should be the beneficiary and control how it is spent. Yes, the builder ends up receiving the funds in the end, to rebuild damage, but this method gives the control of the insurance benefit to the owner.