Running a successful business means taking into account all the possible risks and protecting against them to the best of your ability. It means keeping your workers safe and satisfied. An essential part of doing right by your employees (and protecting yourself from liabilities) is having the right insurance plans in place.
Two forms of small business insurance—workers’ compensation and employers’ liability insurance—cover liabilities relating to employee injuries. While workers’ comp provides benefits to employees who sustain an injury or develop an illness while on the job, employers’ liability insurance covers legal defense expenses should an employee sue you for negligence regarding their injury or health condition. By having both insurance forms, you can cover all your bases relating to at-work injuries.
Occupational Injuries and Illnesses
Some jobs and workplaces are naturally more dangerous than others, but the possibility that a worker may get sick or injured is real for all businesses. As an employer, you must consider the ways employers could get hurt while performing their duties or on company property.
Workers’ compensation insurance provides benefits to employees who sustain an injury or develop an illness while on the job. A few examples include:
- Illnesses caused by working conditions, like hazardous chemicals
- Long-term use injuries, like chronic back pain or carpal tunnel syndrome
- Hearing loss from working in loud environments
- Injuries from accidents, such as slip and falls and vehicle accidents
- In some states, physical conditions caused by stress, like a heart attack
- Pre-existing conditions aggravated by work
Maintaining pristine working conditions can minimize these kinds of accidents and illnesses. Employers have a responsibility to provide a reasonably safe work environment, but insurance exists because no employer can prevent all incidents, even with the best safety plans and practices in place.
The Occupational Safety and Health Administration (OSHA) outlines employer responsibilities to help employers understand what they need to do to keep workers safe. For example, business owners can:
- Keep the workplace free from serious and recognized standards while complying with all OSHA standards
- Provide safe, properly-maintained tools and equipment for employees to use
- Give employees appropriate safety training in a language they understand
- Use clear signs to warn workers of hazards
- Ensure that employees have access to information about their OSHA rights to a safe workplace
Workers’ Compensation Plans and Benefits
Workers’ compensation insurance is required for most businesses with employees, although specific rules vary by state. The insurance provides benefits to employees, including payment for medical expenses, lost wages, and death benefits for surviving dependents in the case of a workplace fatality.
One of the critical differences in workers’ compensation state laws is how and where you can purchase a policy. In most states, you have the option to purchase workers’ comp from a private insurer. However, in monopolistic states (Ohio, North Dakota, Washington, Wyoming), state funded insurance is your only option. It’s important to note that while many workers’ comp policies from private insurance companies include employers’ liability coverage, policies from state funds do not.
Employers’ Liability Insurance Coverage
In states where employers can buy workers’ comp from a private company, most policies include employers’ liability insurance. This coverage protects you, the employer, if an employee sues you after an accident.
Under what circumstances do injured or ill employees sue their employers? Most workers’ compensation-related lawsuits stem from the employee claiming that their injury resulted from gross negligence, and the compensation they received did not cover their expenses adequately. Employees in this position can sue for punitive damages. Who bears the burden of proof in these situations, the employer or employee, depends on state law.
Employers’ liability insurance also covers legal expenses for fighting claims from a third party. A worker may sue a third party, such as a vendor or machine manufacturer, over a workplace accident. If that company turns around and sues you to recoup the damages, your employers’ liability insurance will help cover the costs. Policies may also include financial protection should an employee try to make a fraudulent workers’ comp claim.
Remember, state-funded insurance policies for workers’ comp do not include this coverage. If you operate within a monopolistic state (or if you own a business in a competitive state but opted to use the state fund), you can purchase employers’ liability insurance separate from workers’ comp. Essentially, your employers’ liability insurance will fill in the gaps between your workers’ comp insurance and general liability insurance plans.
Know Your Options, Get Covered
Careful employers keep their workers as safe as possible—but accidents still happen. To provide for your employees in the case of an injury or illness—and to protect yourself from paying out of pocket for legal defense—you need to understand your insurance obligations and options.