If you own a business and have employees, your state’s laws probably require your business to have workers’ compensation insurance. If your state’s laws don’t require your business to have workers’ compensation insurance, they may incentivize your business to have workers’ compensation insurance by barring lawsuits for work-related injuries against your business and limiting the business’s liability to the insurance coverage provided by workers’ compensation.
But this lawsuit bar and limitation on liability may not apply if your business was “grossly negligent”—a greater degree of negligence than ordinary negligence—and that gross negligence caused the employee’s injuries.
In most states, workers’ compensation pays medical expenses and lost wages to a worker who was injured or got sick on the job. But workers’ compensation does not cover all of the liability the employer of an injured worker may face following a workplace injury or illness. To insure against additional potential liability, an employer may purchase employers’ liability insurance (ELI) as part of the workers’ compensation insurance package, or as an additional insurance policy.
Most workers’ compensation policies include employers’ liability insurance—but in some states (North Dakota, Ohio, Washington, Wyoming) an employer must purchase ELI separately.
Employers’ liability insurance typically covers the following claims that may be made against the employer of an injured employee:
• Third-Party Over Actions. In this case, another party that was found liable for the employee's injuries may file a lawsuit against the employee’s employer. For example, if one of the employer’s employees was injured while using a piece of equipment or machinery, the employee may sue the manufacturer on a product liability claim—but the manufacturer might then sue the employee’s employer for failing to properly maintain the equipment or machinery.
• Loss of Consortium. The spouse of an injured employee may file a lawsuit against the employee’s employer for their losses related to the spouse’s injury or illness.
• Dual-Capacity Suits. An employee may file a lawsuit against their employer if an item the employer manufactures caused the employee’s injury.
• Consequential Bodily Injury. A consequential bodily injury claim may be made against the employer of an employee who has suffered a workplace injury or illness when a family member of the employee suffers bodily injury caused by the employee's injuries.
• Gross Negligence Claims. If a workplace manager or supervisor instructs an employee to do something the manager or supervisor knows is dangerous and could result in serious injury or death to the employee, that might constitute gross negligence—a greater degree of negligence than ordinary negligence—and workers’ compensation may not cover the injured employee’s claims against the employer.
In Colorado, businesses with one or more employees are generally required to carry workers' compensation insurance, which provides medical expenses and lost wages to workers injured on the job. This insurance also typically includes employers' liability insurance (ELI), which covers additional liabilities not included under workers' compensation. ELI in Colorado may cover third-party over actions, loss of consortium, dual-capacity suits, consequential bodily injury, and gross negligence claims. However, if an employer is found to be grossly negligent, which is a higher degree of negligence than ordinary negligence, the protections offered by workers' compensation may not apply, and the employer could face lawsuits for work-related injuries. It's important for employers to understand that while workers' compensation insurance limits their liability and often prevents lawsuits for workplace injuries, gross negligence can still expose them to legal claims. To ensure full coverage and compliance with state laws, employers in Colorado should consult with an attorney to understand the specific requirements and options for workers' compensation and employers' liability insurance.
