When an employee gets hurt on the job, most companies assume Workers’ Compensation will take care of everything. It usually does when it comes to medical bills and lost wages. But an injury can set off a chain of events that Workers’ Comp doesn’t address, including lawsuits from family members, claims from third parties pulled into the incident, or allegations that your business played a role beyond basic employment.

These situations can be costly, complex, and time-consuming. They’re also exactly why Employer’s Liability Insurance (ELI) exists. ELI steps in when Workers’ Comp isn’t enough. It fills the legal gaps between a work-related injury and the litigation that may follow. This becomes even more important as companies grow, expand into new environments, or sign contracts that shift responsibilities.

This guide explains what Employer’s Liability Insurance is, what it covers and excludes, what affects cost, how to choose the right limits, and how it differs from other coverage your team may already manage.

What Is Employer’s Liability Insurance?

Employer’s Liability Insurance (ELI) covers your legal defense costs, settlements, and judgments if a workplace injury results in a lawsuit outside the “exclusive remedy” protections of Workers’ Compensation. It’s typically included as Part B of a standard Workers’ Compensation policy.

Workers’ Compensation (Part A) covers the injury itself, like medical care, wage replacement, and disability benefits. ELI addresses the employer’s legal liability related to that injury. Where Workers’ Comp answers, “How do we support the employee?” ELI answers, “How do we protect the company if someone sues?”

Even low-physical-risk companies like SaaS, fintech, cybersecurity, and consulting can encounter ELI-triggering situations through business travel, client-site work, shared premises, or contractual indemnification. As your company grows, so do the potential pathways for litigation.

What Employer’s Liability Insurance Covers

Employer’s Liability Insurance (ELI) doesn’t replace Workers’ Comp. It complements it by handling lawsuits and legal disputes linked to workplace injuries. These are the core protections:

1. Lawsuits Involving Third Parties After an Employee Injury

If an employee is injured at a client site, a vendor location, or a shared building, they may sue the third party. That third party may then respond by pulling your company into the lawsuit and alleging issues with training, supervision, or safety protocols.

ELI covers legal defense, settlements, and judgments in these scenarios. This “action-over” pattern appears across many industries, including office-based ones.

2. Claims That Treat the Employer as More Than an Employer

These dual-capacity claims argue that your company had another role in the incident, such as product manufacturer, landlord, or equipment provider.

This risk increases if your business:

• Creates or assembles physical products
• Maintains labs or warehouses
• Provides equipment that employees use
• Operates in multiple business functions

ELI can respond when an employee alleges harm tied to one of these secondary roles.

3. Lawsuits From Family Members After a Serious Injury

Family members may bring their own lawsuits after a severe injury. These often include:

• Loss of consortium
• Consequential bodily injury

These claims fall outside Workers’ Comp. ELI provides protection.

4. Legal Defense Costs for Covered Lawsuits

Even when a claim has no merit, legal defense costs can be significant. ELI helps pay for attorney fees, court costs, and expert witnesses. Since these costs often erode limits, choosing the right level of protection is important.

What Employer’s Liability Insurance Does Not Cover

Some claims fall outside ELI and require separate insurance:

• Employment-related disputes such as harassment, discrimination, wrongful termination, or retaliation are handled by Employment Practices Liability Insurance (EPLI).
• Intentional employer misconduct when a business knowingly creates unsafe conditions or intentionally harms an employee.
• Non-bodily injury claims like financial loss or contractual disputes.
• Injuries to independent contractors which usually fall under their own coverage or your General Liability policy.
• Coverage in monopolistic states, including Ohio, Washington, North Dakota, and Wyoming, where ELI isn’t included automatically. Companies must buy separate stop-gap coverage.

Factors That Influence the Cost of Employer’s Liability Insurance

Because Employer’s Liability Insurance is bundled with Workers’ Compensation, pricing is shaped by operational factors, including:

• Industry risk level
• Employee travel or offsite work
• Use of machinery or equipment
• Multi-tenant or shared environments
• Contractual indemnification language
• Headcount and payroll
• Claims history and safety practices

Although ELI is often affordable, it plays an outsized role when litigation emerges.

How to Choose the Right Employer’s Liability Limits

There’s no single limit that fits every business. The right level depends on your company’s operations, employee locations, and the nature of your client, landlord, and vendor relationships. Consider the factors below.

Industry and Injury Severity

Your industry shapes your baseline risk.

• Higher severity environments like warehouses, robotics labs, manufacturing, biotech research, and facilities with machinery have a greater chance of multi-party incidents. These often involve equipment makers, landlords, contractors, and staffing agencies.
• Moderate severity sectors like cybersecurity, fintech sales, and R&D may see fewer injuries but often involve offsite work in environments you don’t control.
• Lower-severity industries like SaaS, design, and professional services still face meaningful exposure because injuries often occur during travel or at client sites or coworking spaces.

Your limits should reflect the potential severity of claims, not the frequency of minor injuries.

Contract Requirements

Many businesses increase ELI limits only when a partner requires it. Enterprise clients, landlords, banks, and large vendors often include indemnification language that shifts liability to your company. If you regularly sign MSAs, procurement agreements, commercial leases, or vendor agreements, you may already be obligated to carry higher limits.

Travel and Offsite Work

Employee travel is one of the most common sources of ELI claims, even for remote or office-based companies. Examples include:

• A sales rep injured in a rideshare
• A consultant slipping in a client lobby
• An employee injured at an airport or hotel

Multiple parties may try to shift liability, which increases the value of strong ELI limits.

Equipment, Contractors, and Shared Premises

Exposure increases when employees interact with machinery, contractors, or other businesses in shared spaces. Examples include:

• Injuries tied to the equipment you rent or operate
• Incidents in shared warehouses or coworking spaces
• Accidents involving building systems
• Disputed injuries involving multiple contractors

ELI limits should account for the complexity of multi-party litigation.

State-by-State Litigation Risk

Some states see more litigation and higher jury awards. Companies operating in places like New York, California, or Illinois may want higher limits.

Operating Scale and Growth

As your company grows, so does exposure. Indicators that you may need higher limits include:

• Rapid hiring
• Expansion into new states
• Opening facilities, labs, or warehouses
• Adding travel-heavy roles
• Signing enterprise clients
• Increased reliance on contractors

Reevaluating limits annually helps keep coverage aligned with your business.

Common Misconceptions About Employer’s Liability Insurance

Employer’s Liability Insurance is one of the least understood coverages in a Workers’ Compensation program because it only activates when lawsuits arise around an injury. Since those events are rare, many companies underestimate how important it is. Below are the most common misconceptions, along with what business leaders should understand instead.

“Workers’ Compensation already covers this.”

Workers’ Compensation covers the injury itself: medical treatment, lost wages, disability benefits, and rehabilitation. But it doesn’t shield your business when someone files a lawsuit related to that injury. Lawsuits can come from:

• A third party (like a client or landlord) who’s pulled into the incident
• An employee’s spouse or family member
• Claims alleging your business contributed to the injury in another role

These lawsuits fall outside Workers’ Comp’s no-fault system. Employer’s Liability fills that gap.

“We’re a low-risk office business.”

Even businesses with minimal physical exposure face real Employer’s Liability risk. Office-based companies deal with:

• Injuries during business travel
• Slips or hazards in shared coworking spaces
• Accidents at client sites
• Contractual indemnity obligations that shift liability back to your company

Many ELI claims originate from environments outside your office, places where you have little control over safety conditions.

“General Liability would cover employee injuries.”

General Liability Insurance protects you when non-employees are injured or when your operations damage someone else’s property. Employee injuries are explicitly excluded from General Liability coverage. Instead:

• The injury itself is covered by Workers’ Compensation
• Any lawsuit tied to that injury is covered by Employer’s Liability

General Liability and ELI address completely different kinds of liability.

“We don’t manufacture anything, so we’re not at risk.”

ELI claims are not limited to physical products or factories. They often arise from everyday business activities, especially when multiple parties are involved. Examples include:

• A client alleging that your training or supervision contributed to an injury
• A landlord pulling you into litigation after an accident in a shared building
• A vendor blaming your company for unsafe conditions
• Family members seeking damages after a severe injury

Even companies that build software, provide services, or work remotely can be pulled into litigation if another party believes your business shares fault.

“Employer’s Liability Insurance is only relevant if we have a big team.”

Team size influences frequency, but not severity. A single severe accident involving one employee can lead to:

• Multi-party lawsuits
• High legal defense costs
• Significant settlement pressure
• Long-term claims involving spouses or dependents

Small teams are not immune. In fact, smaller businesses often feel the financial impact of litigation more acutely.

“It’s not worth increasing limits. It’s never used.”

Employer’s Liability is designed for high-severity, low-frequency events. Yes, claims are rare but when they happen, they tend to be:

• Complex
• Expensive
• Prolonged
• Multi-party

In many cases, legal defense alone can exceed the standard limits provided by default Workers’ Comp policies. Scaling limits to match real operational risk is a strategic decision, not a cost-center formality.

Employer’s Liability vs. Other Types of Business Insurance

Because multiple insurance lines touch employee or injury scenarios, Employer’s Liability Insurance is often confused with Workers’ Comp, Employment Practices Liability (EPLI), or General Liability. This comparison table clarifies where each policy applies.

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Employer’s’ Liability vs. Workers’ Compensation

Workers’ Compensation and Employer’s Liability are paired for a reason. They address different aspects of the same event.

Workers’ Compensation handles:

• Medical care for the injured employee
• Lost wages
• Disability or rehabilitation benefits
• Death benefits

It’s a no-fault system, meaning the employee can’t generally sue the employer for the injury itself.

Employer’s Liability, on the other hand, steps in when:

• A third party blames your company for contributing to the injury
• An employee’s family sues for loss of companionship or financial impact
• Someone claims your business had another role in causing harm

If Workers’ Comp answers the employee’s needs, ELI protects your business from the lawsuits that ripple out beyond the initial claim.

Employer’s Liability vs. Employment Practices Liability (EPLI)

These policies cover completely different categories of risk. EPLI covers employment practices, including:

• Wrongful termination
• Harassment
• Discrimination
• Failure to promote
• Retaliation claims

These disputes do not involve bodily injury but involve how an employee was treated in the workplace or how employment decisions were made. Employer’s Liability covers bodily injury-related lawsuits tied to workplace accidents or conditions.

A simple test:

• If the claim involves physical injury, it’s Employer’s Liability
• If the claim involves how someone was treated at work, it’s Employment Practices Liability

Learn more about the differences between Employer's Liability and EPLI.

Employer’s Liability vs. General Liability

General Liability protects your business when a non-employee is injured or their property is damaged because of your operations or product. Examples include:

• A visitor slipping on your office floor
• A customer was injured by your product
• A vendor’s equipment was damaged during installation work

General Liability Insurance doesn’t cover employee injuries. Those fall under Workers’ Compensation, and any related lawsuits fall under Employer’s Liability. Think of it this way:

• General Liability protects you from what your business does to the public.
• Employer’s Liability protects you from what happens to your employees that later leads to a lawsuit.

Employer’s Liability vs. Umbrella / Excess Liability

Umbrella and excess liability policies do not replace Employer's Liability; they extend its limits. Umbrella or excess policies:

• Activate only when the limits of an underlying policy (like ELI or GL) are exhausted
• Provide an extra layer of protection for severe or multi-party claims
• Are often required by enterprise clients or landlords

Companies with large contracts, travel-heavy teams, or any physical operations often pair ELI with an umbrella policy to ensure they can withstand high-severity lawsuits. Umbrella coverage is only as strong as the foundation beneath it, which means your Employer’s Liability limits must be appropriate for your operations before you layer anything on top.

How Vouch Helps Companies Manage Employer’s Liability Insurance

Employer’s Liability coverage is a safeguard for continuity, contracts, and credibility. Vouch helps companies approach it strategically by combining:

• Industry-specific expertise to understand risk patterns in tech, fintech, professional services, life sciences, and light industrial environments.
• Tailored guidance that aligns your Workers’ Comp and ELI limits to your operational model, contractual requirements, and growth plans.
• Efficient, AI-enhanced workflows that keep insurance processes moving as fast as your business.
• A unified brokerage experience where all major commercial lines are coordinated together, reducing gaps and simplifying decision-making.

With the right support, Employer’s Liability Insurance becomes a foundation for growth with confidence.

Workers’ Compensation plays an essential role in supporting injured employees. But it doesn’t shield your business from the legal fallout that can occur around those injuries. Employer’s Liability Insurance fills that gap, ensuring your company remains protected when lawsuits arise from complex, multi-party, or high-severity incidents.

The right limits depend on how your business operates (its industry, contracts, travel patterns, facilities, and overall growth trajectory). As your company expands, ELI becomes a critical part of building resilience and preserving momentum. A thoughtful, well-aligned Employer’s Liability strategy helps your business move forward with clarity and the confidence that you’re covered when it matters most.

Frequently Asked Questions

Do all Worker's Compensation policies automatically include Employer's Liability Insurance?

In most states, yes. Employer's Liability Insurance is included as Part B of a standard Workers’ Compensation policy. However, in monopolistic states (Ohio, Washington, North Dakota, and Wyoming), Worker's Comp is provided by the state and ELI must be purchased separately as “stop-gap” coverage.

What types of businesses need Employer's Liability Insurance the most?

Any business with employees needs Employer's Liability Insurance, regardless of physical risk. High-severity environments (labs, warehouses, manufacturing) face more complex, multi-party incidents, but low-risk office businesses still encounter Employer's Liability Insurance claims tied to travel, client-site work, shared premises, and contractual indemnification.

How much Employer's Liability  coverage should a company carry?

Appropriate limits depend on your operations, travel patterns, contracts, facilities, and growth trajectory. Companies with enterprise clients, shared workspaces, offsite work, or equipment exposure often select higher limits. Businesses operating in litigation-prone states (e.g., NY, CA, IL) may also benefit from increased protection.

Does General Liability Insurance cover employee injuries or related lawsuits?

No. General Liability covers injuries to non-employees and third-party property damage. Employee injuries fall under Worker's Compensation, and any lawsuits arising from those injuries fall under Employer's Liability. Businesses should rely on both coverages, plus umbrella limits where appropriate, to protect against high-severity incidents.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.