Why a Business Owner Cannot Rely Solely on Workers’ Compensation Insurance


You believe you are a responsible business owner and that you provide a safe place for your employees and independent contractors to work and a safe place for vendors, clients, and customers to visit. You also comply with your state’s workers’ compensation statute by maintaining the required coverage and posting the mandated notices in the workplace.

Workers’ compensation insurance is not enough to reduce the risk of liability for injuries because it does not cover everyone who visits your place of work, nor does it cover all circumstances in which employees and others can be injured and you can potentially be liable.

Find out how workers’ compensation and personal injury law intersects with the various forms of insurance available to you as a business owner.

Types of Insurance Available to Businesses

The purpose of insurance is to minimize the risk of financial liability for the thing insured against, whether interruption of operations, injuries on the worksite, a collision involving the company van, or an accusation of professional incompetence.

A prudent business owner should purchase the following types of insurance:

  • Commercial General Liability Coverage
  • Workers’ Compensation Coverage
  • Commercial Auto Insurance
  • Business Income Insurance
  • Commercial Property Insurance
  • Professional Liability Insurance, also known as “errors and omissions” insurance

These days so many transactions are completed electronically, and customer and client databases are stored along with your company’s trade secrets and other intellectual property. Data breach insurance can help you if your data security is compromised.

Small Business Owner’s Insurance Policy

Many insurers offer bundled policies for small business owners. These bundles may include any or all of the types of policies listed, with coverage amounts appropriate to the nature and scope of your business concern. This article will discuss the types of policies that cover you for injuries to employees and others and how they work to protect you and your business from financial liability.

What if a Vendor, Customer, or Third Party is Injured on Your Work Premises?

If a person not employed by you is injured on your worksite or at your office, your commercial general liability insurance will cover you. Commercial general liability insurance includes premises liability, so if an aspect of your work environment caused someone to be injured, that policy would pay.

Your insurance company’s attorneys will defend you and will argue that the injured party was at least partially at fault, if possible. For example, if someone tripped on your broken sidewalk, and it was readily apparent that the sidewalk was uneven, but the person tripped because they were texting and not paying attention, that will place some or all of the responsibility for their injury upon them, depending upon state law.

Regardless, your insurer’s attorneys take care of this for you when you have general liability insurance.

What if an Employee is Injured Doing Something Illegal?

An employee who is injured while performing regular duties will be compensated for medical expenses and lost wages, as well as a temporary or permanent partial or total disability if warranted by the seriousness of the injury, by workers’ compensation insurance.

If an employee is injured doing something illegal, such as operating a motor vehicle while intoxicated or fighting with another employee, workers’ compensation may not apply. In that case, the employee may look to you, the employer, and your insurer as the deep pocket who must pay. If the employee could show, for example, that you knew he came to work intoxicated and turned a blind eye, or that you knew there were tensions on the work floor but did nothing to prevent violence, he may be able to convince a court that you are partially liable for his injury. In some states, partial liability is enough to make you financially responsible.

If you were directing the employee to do something illegal, and the employee was injured committing that act, you may face personal responsibility for the cost of their injuries as well as punitive damages and perhaps criminal charges.

What if an Employee is Injured Doing Something Not Trained to Do, or Using Equipment Without Training?

If an employee took it upon themselves to do work for which they were not trained and are injured, that work is outside their regular work duties and will not be compensable under the workers’ compensation scheme.

So what can the employee do? The employee can allege that their employer or a manager under the control of their employer directed that conduct, or knew about the conduct and turned a blind eye.

If you or your manager directed the employee to perform a duty without proper training, or you turned a blind eye to an employee overreaching the limits of their training, that could render you and your business liable for the employee’s injuries.

Many insurance policies have exclusions for grossly negligent or reckless conduct on the part of an employer. Requiring or allowing untrained employees to perform tasks or use equipment that they are not qualified to do or use will likely qualify as an exclusion.

What if an Employee Is Driving the Company Vehicle and Collides with Another Vehicle, Causing Injuries?

If the employee was injured and was performing regular work duties when the accident happened, workers’ compensation insurance will likely compensate them for medical expenses and lost wages. But what about the other parties injured in the accident? You are vicariously liable for your employee’s conduct while working, so your commercial auto insurance will step in and provide coverage.

Whether fault for the accident lies with the employee or another party is not an issue in no-fault states, however, in at-fault states, your insurer and the insurers of the other parties will either negotiate or litigate the issues of fault and compensation.

If your employee was not performing work duties in the company vehicle, workers’ compensation would not cover them. In that case, the employee could look to the other parties to the accident for compensation, and could also sue you for an alleged failure to keep the vehicle in a safe, well-maintained condition. Your insurance will cover you there too.

These are only four instances of personal injuries that can have a significant impact on your business if you do not have commercial general liability coverage, commercial auto insurance coverage, and workers’ compensation coverage in place. Do not risk the financial health of your business by skimping on insurance coverage.

About the Author

Veronica Baxter is a blogger and legal assistant working and living in the great city of Philadelphia. She frequently works with HGSK, busy bad faith insurance lawyers with offices throughout Pennsylvania.

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