The other part of the standard workers compensation policy – employers liability insurance provides coverage for damages because of bodily injury to an employee; standard and increased limits, statistical codes.
Employers Liability Insurance is defined as coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers compensation law. While workers compensation insurance pays benefits required by statute to an injured employee, employers liability insurance provides coverage for defense costs and any amount the employer must legally pay as damages because of bodily injury to an employee. Although workers compensation is the exclusive remedy for on-the-job injuries, there are certain situations where employees may receive workers compensation benefits and still sue the employer. Examples of employers liability claims are:
- third party claims – claims made by a third party who has been sued by an injured employee
- care and loss of service claims (e.g. loss of companionship or “consortium”)
- dual capacity claims – when an employer acts in two capacities toward a person (e.g. the employer also manufactures the equipment that contributed to the employee’s injury).
Standard Limits of Liability, Per Accident
The standard EL limits are not found in the statute itself, but are contained in the Basic Manual for Workers Compensation & Employers Liability Insurance – 2021 Edition. This manual and its rules are filed with and approved for use by the Indiana Department of Insurance. Below is an excerpt from the manual page.
Basic Manual Rule BM‐EMPS‐SB2F6
14. Limits of Liability
a. Standard Limits of Liability
Standard limits of liability apply to Employers Liability Insurance:
- With or without Workers Compensation Insurance
- For employees subject to Voluntary Compensation Insurance
- For operations subject to USL&HW Act
- For damages under admiralty law or FELA
(1) Bodily Injury by Accident
Bodily Injury by Accident (each accident limit) applies to all bodily injury resulting from a single accident.
(2) Bodily Injury by Disease
Bodily Injury by Disease is represented by two limits:
- Each Employee Limit
Each Employee Limit is the maximum amount of damages that an insurer will pay for a single employee during the policy year. It applies as a separate limit to bodily injury by disease to any one employee.
- Policy Limit
Policy Limit is an aggregate limit that applies to all bodily injury occurring from disease during the term of the policy, regardless of the number of employees who are injured by disease. An aggregate limit is the maximum amount of damages that an insurer will pay during the policy year.
|Employers Liability, Voluntary Compensation, USL&HW Act & Extensions||Admiralty Law|
|Bodily Injury by Accident||$100,000—each accident||$100,000|
|Bodily Injury by Disease||$100,000—each employee||Not applicable|
|Bodily Injury by Disease||$500,000—policy limit||$100,000|
Increased limits for standard Part Two Employers Liability Insurance is calculated using the Table for Increased Limits, Basic Manual Rule BM‐EMPI‐I466A.(1), see table below. Admiralty (Jones Act) and railroad workers (FELA) have their own endorsements and set of limits.
The maximum limits available on Assigned Risk Policies are $1 million-each accident/1 million-policy limit/$1 million-each employee. Table for Increased Limits*
|Limits of Liability (000 omitted)||Percentage||Minimum Premium For Increased Limits|
*Refer to Appendix C for additional limits values.
Additional Premium for Increased Limits
Basic Manual, Rule BM‐EMPI‐R32ED. The additional premium for increased limits must be determined by multiplying the total manual premium by the percentage in the Table for Increased Limits.
Increased limits for admiralty and FELA are calculated using another table, Basic Manual Rule BM‐EMPI‐R2974. They are totally independent of one another. It is not necessary to have the same limits for each on the same policy.
Nonratabled Disease Element
The nonratable disease element portion of a class code rate is included when calculating the premium for increased limits for Employers Liability insurance? This question arises for black lung disease coverage for coal mine risks. The Basic Manual states the increased limit premium is determined by “multiplying the total premium by the percentage in Table of Increased Limits.” This premium is subject to experience rating, premium discount, and retro rating.
“Employers Liability only” claims are reported as losses in the statistical plan. Refer to Statistical Plan – 2008 Edition Rule Part 4-C-4:
“Employers Liability losses including Allocated Loss Adjustment Expenses (ALAE) must be reported as part of the incurred indemnity loss and paid indemnity loss as appropriate. Employers Liability ALAE represents the expenses of a carrier in connection with claim settlements, which can be directly allocated to a particular claim.
Employers Liability ALAE should not be reported in the ALAE incurred amount or ALAE paid amount.”The Statistical Plan – 2008 Edition Rule 6-K-4, lists the Type of Claim – Loss Conditions. Two codes are possible involving Employers Liability:
- Code 02 – Employers Liability only
- Code 03 – Workers Compensation Including Employers Liability
Allocated Loss Adjustment Expense
Allocated Loss Adjustment Expense (ALAE) is included in employers liability claims but not in workers compensation claims. The Statistical Plan makes this distinction.
Employers liability (EL) insurance is a tort-type, liability cover with limits. You would expect to keep tabs on your ALAE because the policy limit would include both the loss and ALAE costs. ISO has always included ALAE in other lines, all which contain policy limits. Workers compensation in contrast, is no fault in concept, and the insurer must pay whatever the statute requires and pay whatever it costs to defend a claim.
Losses are defined in the Experience Rating Plan Manual, Rule 2-C-13. and include Employers Liability Coverage, subject to the accident limitations shown in the Tables of Weighting and Ballast Values. For example, a single accident involves both WC and EL losses. The total loss is $250,000. The carrier would report the loss amount of $250,000 and code the type of coverage – loss conditions, as (03) based on WC and EL payments arising out of the incident which resulted in an injury to one worker. The Stat Plan does not give the carrier the option to report this as two separate claims.
For Indiana advisory rates effective 1/1/2020, the State Per Claim Accident Limitation is $196,000 and the Employers Liability Accident Limitation is $55,000. In most states, the state per claim accident limitation is usually higher than the EL limit.
EL Portion of Rates
Employers Liability losses are included in with indemnity losses, therefore, it is currently impractical to attempt to split out the portion (percent) of the advisory rate that contemplates employer liability insurance. Typically, EL is a very small portion of costs. Indemnity costs in total in Indiana are only about a third of all costs.