July 19, 2022

Employer's Liability Insurance | Meaning, Coverage, and Exclusions

Employer's Liability Insurance | Meaning, Coverage, and Exclusions

Employer’s Liability Insurance protects businesses from financial losses arising from their employees filing lawsuits against them for workplace accidents, occupational diseases, discrimination, or other misconduct. Employer’s Liability is an essential insurance policy as it meets the mandatory requirement of businesses to comply with rules laid down under the Fatal Accident Act 1855, Common Law, as well as Workmen's Compensation Act 1923.

Employer’s Liability Insurance primarily covers a company’s legal liability, which includes its defense costs, court ordered damages, and other legal expenses that may emerge when an employee blames the company’s negligence for their injury or illness and ends up suing. Generally, this insurance forms part of a Workmen’s Compensation Insurance policy, which also covers an injured worker’s medical expenses and lost wages.

Under this policy, the business is indemnified against its legal liability as an employer for accidents causing harm to a worker during the course of their employment. This involves coverage for the following-

  • Employee’s medical expenses and lost wages in the event of disability or illness
  • Compensation to the employee’s family in the event of death due to an accident
  • Legal expenses of the business incurred while defending lawsuits
  • Business’s liability arising either under common law or the laws set out in the schedule Workmen's Compensation Act 1923.

An Employer’s Liability Insurance policy does not cover everything. No coverage is provided for the employer’s financial obligation to the employee in the following cases -

  • Willful or intentional negligence of the business
  • Any non-compliance of industry practices or a statutory law
  • Any fines or penalties levied against the business
  • Any injury or disease directly attributable to war or a nuclear risk
  • Any injury or disease suffered by an employee of the business’s contractor
  • Any liability of the business which arises by virtue of an agreement
  • Any compensation for diseases mentioned in Part 'C' of Workmen's Compensation Act 1923

Workplace accidents can occur at any time despite stringent safety measures that may be in place. Although a Workmen’s Compensation Insurance contract takes care of a business’s legal liability towards its employees, unexpected lawsuits claiming negligence can still arise. And in order to ensure that your business does not suffer substantial financial losses, an Employer’s Liability Insurance policy is a must.

Further Reading

Types of Business Liability Insurance policies

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.