Employers’ liability insurance

Until the mid- to late-1900s, the Employers’ Liability coverage that was outlined in Part II of workers’ compensation policies, along with errors and omissions (“E&O”) and commercial general liability (“CGL”) policies, were the main policy forms that employers relied upon to seek coverage for employment claims. Employers’ Liability insurance is designed to protect employers against liabilities that arise from injuries to employees that are not covered by Part I of the workers’ compensation policy (which protects against workplace injuries to workers).

Part II of the workers’ compensation coverage, also called Employers’ Liability coverage, protects the employer against liability for bodily injury or death of an employee arising out of the injured employee’s employment. The same limitations relating to the physical manifestation of emotional distress, which is common in the CGL context, also applies here if a tender is made under Part II of a workers’ compensation policy.

Employment practices liability (“EPL”) insurance provides coverage for employment-related acts of the employer, the employer’s members, partners, spouse, managers, officers, directors, and the insured’s current and former employees. EPL insurance covers these parties for injuries caused by:

  • “Wrongful acts”;
  • Employment actions;
  • Breach of employment contract;
  • Wrongful termination;
  • Negligent hiring or supervision;
  • Retaliation;
  • Harassment; and
  • Other tortious acts (which includes discrimination).

The insurer is obligated to defend the employer at the insurer’s expense. An exception to this general rule arises whenever there are dual employers (a general employer and a special employer). The general employer’s liability policy does not have the duty to defend the special employer against a civil action by the employer for a work injury if the special employer is not named as an insured on the policy. However, there might be a duty to defend the special employer if the factual allegations in the employment practices liability complaints point to a duty to defend.

Keep in mind that many states prohibit insurance coverage of intentional acts. In these states, insurance coverage may be provided for the defense of the alleged intentional conduct, but not for indemnification.