(US law and generally) Any business, big or small is required by law to have a liability insurance coverage. This is to protect the company from financial losses when obliged to spend for damages or injuries caused to employees while working, or to 3rd party as a result of an accident for example. By definition, liability insurance is the coverage for legal liability for injury or damage to property including financial loss caused to employees, customers or third parties. Two of the many types of liability insurance which will cater to the legal liabilities for employees and third parties are:
- General Liability Insurance – This has a wide coverage with the sole objective of protecting the company or business from claims by third parties as a result of injury while in your business premises or resulting from actions of the employees. This insurance coverage will prevent the company from financial loss from 3rd party claims resulting from a lawsuit for bodily injury or damage to property.
- Workers’ Compensation Insurance – Employers are required by law to secure workers’ compensation insurance for all their employees. This insurance should cover the employee’s compensation and medical benefits if the injured employee sustained injury in a job-related accident. Regardless of who caused the job related accident, this insurance entitles employees to receive benefits contained in the stipulations of this coverage.
These two are deemed applicable for an employee who suffers an injury while performing his function at work or at another place of business which is required by his work.
Scenario 1 :
An employee of Company A is sent on an errand to Company B, where he sustained an injury while at Company B.
Depending on the state, Company B may be liable for the injury sustained by employee of Company A under the general liability insurance coverage. If Company B is liable, they will be obligated to pay for the expenses for the injury sustained as a result of the accident which happened in the premises of Company B.
Company A may also be liable for the employee’s compensation and medical benefits since the accident is job-related regardless if the accident is caused by Company B.
Scenario 2 :
An employee, while working at Company A (where he is employed), sustained an injury as a result of a slip-up accident in the company premises.
Depending on the state and the coverage, Company A may be obligated to provide medical benefits to the injured employee due to a slip-up accident which may be argued as a non job-related accident.
A variation of this scenario would be a chemist employee of Company A, who sustained injury as a result of chemical spill which came in contact with the employee. This could qualify the employee for compensation and medical benefits as stipulated in the Workers’ Compensation Insurance for a job-related accident.
A business without workers’ compensation insurance will be penalized and in which case the injured employee may choose to file a lawsuit against his employer or file claims with the state’s Insurance Commission for the payment of his medical and compensation benefits.
The employer may opt to check with their insurance company to see if they can use any part of the general liability insurance to cover for the medical bills of the injured employee. Some insurance companies are flexible enough to look into specific situations to help the insured, for maybe an additional premium payment.
In general, all businesses should make an effort to comply with the mandatory requirements concerning insurance as this would give the protection it is intended for when the need arises.
About the Author:
Gerald Berkowitz is a Pennsylvania business litigation attorney who assists businesses in coverage issues and commercial disputes in Pennsylvania. He regularly writes on insurance and commercial collections issues.