You've secured workers compensation insurance for your Central New York business, and you feel confident you're covered when employees get hurt on the job. But what happens when someone sues your company over a workplace injury—and that lawsuit falls outside the standard workers comp system?
Many business owners don't realize their workers comp policy includes a second layer of coverage that handles these situations.
At the Horan insurance agency, we help Central New York business owners understand the coverage components in their workers comp policy, including the employers liability portion. As an independent agency working with numerous carriers, we can review your policy details and discuss how this coverage applies to your situation.
In this article, we'll explore what employers liability insurance covers, how New York's approach differs from other states, and why understanding this coverage matters when you're coordinating with umbrella policies.
Understanding the Two Parts of Your Workers Compensation Policy
Your New York workers compensation policy consists of two distinct parts. Part One covers your statutory obligations—the medical bills, lost wages, and rehabilitation costs when employees suffer work-related injuries or illnesses. This operates as no-fault coverage, meaning benefits are paid regardless of who caused the accident.
Part Two provides employers liability insurance, which covers legal defense costs and damages when lawsuits arise that aren't fully addressed by Part One. While Part One handles the employee's direct claim for benefits, Part Two steps in when third parties or family members bring legal action against your business.
Don't confuse employers liability with Employment Practices Liability Insurance, which covers claims like wrongful termination, discrimination, and harassment—not injury-related lawsuits.
For example, if an employee at a Liverpool manufacturing facility gets injured using equipment and then sues the equipment manufacturer for damages, that manufacturer might turn around and sue your business for negligent maintenance or inadequate training. Part Two would respond to this third-party-over action, covering your legal defense and any settlement or judgment costs.
What Employers Liability Insurance Covers in New York
Employers liability insurance responds to several types of claims beyond the third-party-over scenario. Dual capacity suits happen when an employee sues your business in a role separate from the employer-employee relationship.
Consider a Camillus machine shop that manufactures a tool. If an employee gets injured using that tool and sues the business as the product manufacturer rather than as their employer, employers liability coverage would apply.
Loss of consortium claims involve family members suing for damages they've suffered due to the employee's injury. A spouse might claim loss of companionship or emotional distress stemming from their partner's workplace injury. While these claims aren't as common as standard workers comp claims, they can result in substantial legal costs.
New York's Unlimited Coverage Tradition for Subject Employees
New York takes a unique approach to employers liability coverage. For employees subject to the New York Workers Compensation Law, carriers traditionally provide unlimited coverage under Part Two. This isn't mandated by statute, but it's been the standard practice since the 1950s.
The New York State Department of Financial Services has never approved a policy form that would impose limits on coverage for compensable injuries involving employees subject to state workers comp law. Every policy includes the New York Limit of Liability Endorsement, which confirms this unlimited coverage for subject employees.
This unlimited feature extends to lawsuits related to covered employees' injuries. Whether a contractor sues your Cicero warehouse over an injury incident or a manufacturer brings action against your business, your employers liability coverage won't cap out at $100,000 or $500,000—it continues indefinitely for New York-covered situations.
When Standard Limits Apply and Why They Matter
However, standard limits do apply in specific circumstances. Your policy declarations will show these limits under Part 2—Employers Liability:
- Bodily Injury by Accident: $100,000 (Each Accident)
- Bodily Injury by Disease: $500,000 (Policy Limit)
- Bodily Injury by Disease: $100,000 (Each Employee)
These limits apply to employees not subject to New York Workers Compensation Law.
Non-subject employees include clergy members, certain maritime workers, railroad employees engaged in interstate commerce, and workers covered under other states' laws. If these workers become involved in employers liability claims, the stated policy limits would cap your coverage.
These limits also become significant when you're coordinating with commercial umbrella policies. Some umbrella carriers require higher employers liability limits before they'll provide excess coverage. A general contractor might require subcontractors to carry $500,000 or $1 million in employers liability limits for all contract work.
Understanding how your employers liability coverage works helps you make informed decisions about whether to increase your limits and how to structure your umbrella coverage. This becomes particularly relevant if your Syracuse-area business works with contractors who have specific insurance requirements.
Avoid Gaps in Your Workers Compensation Coverage Structure
The employers liability portion of your workers comp policy serves a distinct purpose from the benefits portion. When you know what Part Two covers and how New York's unlimited provision works for subject employees, you can better evaluate your overall liability coverage structure.
The Horan insurance agency provides information to Central New York business owners about all aspects of their workers compensation policies, including employers liability coverage. We can review your current policy structure, discuss how it coordinates with other business insurance, and share insights about coverage considerations for your industry and situation.
Click the Get a Quote button below to discuss your workers compensation coverage with someone who can review all the details specific to your Central New York business.
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