DuffyConnors Briefs: Understanding Employer's Liability

For more information, contact
Patricia S. Duffy, or
Kevin L. Connors
610.524.2100
or visit www.duffyconnors.com

Employer’s Liability coverage incorporates standard policy language triggering coverage when:

“A bodily injury… arises and in the course of” the employee’s employment;
The employment is “necessary” or “incidental” to the employer’s work in a state that is referenced as being “covered” on the policy declarations sheet;
The bodily injury arises during the policy term; and,
The bodily injury is either caused or aggravated by conditions incidental to the employment.

Typical exclusions barring coverage include;

Liability assumed under a contract;
Punitive damages (an uninsurable form of damages);
A bodily injury claim involving employees employed in violation of the law, but only when the employer had actual or constructive knowledge of the illegal employment;
Any bodily injury claim falling under the purview of worker’s compensation, occupational disease, unemployment compensation, or some other form of disability law;
Any bodily injury claim involving injuries that occur outside the United States; and,
Any claim for damages that involve wrongful or illegal discharge, or discrimination in some form or context.

Briefs is designed to provide accurate and authoritative information in regard to the subject matter covered.
If legal advice is required, you should contact an attorney at DuffyConnors LLP.

DuffyConnors LLP 102 Pickering Way, Suite 400 Exton, PA 19341 Ph: 610.524.2100 Fax: 610.524.0600

To add or remove your name from this subscription list, please email DuffyConnors.



		February 23, 2006
		Understanding Employer's Liability

	For more information, contact Patricia S. Duffy, or Kevin L. Connors 610.524.2100 or visit www.duffyconnors.com	In the normal course of adjusting worker’s compensation claims under traditional worker’s compensation insurance policies, there is little call for or need to understand Part B coverage, titled as “Employer’s Liability.” It is a standard coverage incorporated into NAIC-issued insurance policies.

		Part B is a form of coverage that is intended to protect employers from common law liability that might arise under circumstances that are generally limited to the inapplicability of “no fault” workers compensation laws providing employers with statutory immunity from civil liability, or which might involve legal actions in which employers might not be entitled, or there are questions regarding the entitlement to, the statutory protection of worker’s compensation laws.

		Generally, there are four types of legal actions that trigger Part B Employer’s Liability coverage. These actions include:

		Claims for contribution/indemnification, arising either under a contractual or common law duty; Third-party actions involving allegations that employers are engaged in a “dual capacity,” a classic example being a medical malpractice claim arising as a result of an employee being treated “in-house,” with medical negligence occurring in the course of treatment; Claims involving loss of consortium where an employee’s spouse, who is not necessarily subject to the exclusive remedy provisions Worker’s Compensation laws, makes a claim for negligent or intentional infliction of emotional distress and/or a separate claim for replacement services; and/or A claim for consequential damages by a spouse, child, parent, or sibling of an injured employee with the consequential damages arising as a direct result of the employee’s injury, an example of which might occur as a result of an employee sustaining a work-related communicable infection that then spreads among family members.

		Employer’s Liability coverage incorporates standard policy language triggering coverage when: “A bodily injury… arises and in the course of” the employee’s employment; The employment is “necessary” or “incidental” to the employer’s work in a state that is referenced as being “covered” on the policy declarations sheet; The bodily injury arises during the policy term; and, The bodily injury is either caused or aggravated by conditions incidental to the employment.

		Typical exclusions barring coverage include; Liability assumed under a contract; Punitive damages (an uninsurable form of damages); A bodily injury claim involving employees employed in violation of the law, but only when the employer had actual or constructive knowledge of the illegal employment; Any bodily injury claim falling under the purview of worker’s compensation, occupational disease, unemployment compensation, or some other form of disability law; Any bodily injury claim involving injuries that occur outside the United States; and, Any claim for damages that involve wrongful or illegal discharge, or discrimination in some form or context.

	Basic policy limits can be inadequate to protect the employer from excess verdict liability, absent umbrella or excess insurance coverage.	In most cases, Part B coverage provides basic limits of $100,000/$500,000/$100,000. For obvious reasons, these basic policy limits can be inadequate to protect the employer from excess verdict liability, absent umbrella or excess insurance coverage. From the insurance carrier’s perspective, caution is critical in preventing an excess verdict from being turned into an assignment of rights for purposes of asserting liability for bad faith

	It is also important to understand that the insurance policy limits set forth under Part B coverage are not a limitation on coverage under Part A involving coverage for worker’s compensation liability.	In the event that Employer’s Liability coverage is implicated, it is critical that the policy be reviewed as to operative conditions required to trigger coverage, the applicability of any policy exclusions, and, without fail, the policy limits available for the insured’s employer’s protection. It is also important to understand that the insurance policy limits set forth under Part B coverage are not a limitation on coverage under Part A involving coverage for worker’s compensation liability.

		Although the typical worker’s compensation insurance policy is intended to integrate coverages to insure that the employer is not left unprotected, irrespective of the nature of the claim or action, liability for worker’s compensation benefits is statutorily unlimited while coverage under Part B is not.

		Practical Tips

		For employers, it is critical to understand the existence and scope of this form of liability coverage separate and distinct from worker’s compensation coverage. For insurers, it is critical that the coverage be understood in terms of what types of claim it is intended to cover, the limitations on coverage both in terms of policy limits and types of claim as contrasted against coverage available under the standard worker’s compensation insurance coverage, as well as the need to analyze the coverage within the scope and context of the claim and the policy-driven limitations in terms of both dollars and language.

		Questions concerning Employer’s Liability coverage can be directed to our worker’s compensation attorneys.

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Briefs is designed to provide accurate and authoritative information in regard to the subject matter covered. If legal advice is required, you should contact an attorney at DuffyConnors LLP. DuffyConnors LLP 102 Pickering Way, Suite 400 Exton, PA 19341 Ph: 610.524.2100 Fax: 610.524.0600 To add or remove your name from this subscription list, please email DuffyConnors.