Keeping your employees safe is an important part of running your business. However, accidents happen, and you need to make sure that you’re covered. That’s why almost every state, with the notable exception of Texas, requires businesses to have workers’ compensation insurance.
Workers’ compensation is only one type of liability coverage business benefits from having. Knowing what workers’ compensation covers and doesn’t cover is essential to make sure you have the right coverage. If you partner with a PEO, knowing what is covered by your co-employment agreement is also vital.
What Workers’ Compensation Liability Insurance Is and What It Covers
When an employee suffers an injury or illness as a direct result of something that happens during the course of their work, they file a workers’ compensation claim. Worker’s compensation liability insurance is what employers pay into so that:
- Employees may earn a wage while in recovery for a qualified workplace injury or illness
- Medical expenses incurred by the employee are paid for
The specifics of what sort of workers’ compensation insurance you’re required to carry will vary based on what state you’re in and what industry your business operates in. State laws tend to require insurance coverage as long as you have one employee. For sole proprietorships with no additional employees, some states allow business owners to opt-out to save on insurance costs.
Employer’s Liability Insurance
Workers’ compensation liability insurance doesn’t cover every aspect related to a workers’ injury. Employer’s liability insurance is the second type of insurance, typically bundled with workers’ compensation insurance, covers some of the remaining aspects not covered by standard worker’s compensation liability coverage.
In particular, if an employee is claiming it was negligence on your part that resulted in his or her condition, workers’ compensation doesn’t cover you for:
- Judgments issued by a court
- Settlements you accept to avoid a court judgment
- Costs occurred through litigation (i.e., attorney or court fees)
Employer’s liability insurance will also cover your business if an employee is severely injured or killed during the course of his or her official duties and family member files a loss of consortium lawsuit.
General Liability Insurance
Worker’s compensation and employer liability insurance cover costs that could arise from an employee’s injuries or illnesses. However, if a customer or other member of the public suffers any sort of injury as a result of the operation of your business, they are not covered under these policies. Instead, these claims fall under the umbrella of general liability insurance.
While the standard example is someone getting hurt on your business’s premises, general liability insurance covers more than that. It can also cover any expenses to repair damages to property that comes as a result of your employees’ actions. General liability insurance will also cover any settlements or judgments issued against you for slander or libel.
How a PEO Affects Your Liability Coverage
When you partner with a PEO, you sign a co-employment agreement whereby the PEO becomes the employer of record for your employees. This typically allows the PEO to handle certain HR functions while you remain in control of the day-to-day operations of your business.
As part of this arrangement, your PEO takes on some of the liability your business faces. However, the specifics of what is covered varies from state to state and based on the terms of your co-employment agreement.
While your PEO partner will do what it can to help with your liability, not every arrangement covers you for all claims. It’s why it’s important to know what your co-employment agreement covers and what gaps may exist in your coverage.
NetPEO Can Help You Find the Right PEO to Cover Your Workers’ Compensation Liability
If you’re considering a co-employment agreement with a PEO, or you’re not happy with your workers’ compensation liability with your current PEO, NetPEO is here to help. As a PEO broker, we work with small businesses just like yours to find the right PEO to meet your HR needs.
When you’re ready to take the next step, call us at (678) 376-1212 or submit your information using the form on this website. One of our representatives will be in touch for a free consultation about your HR needs and can discuss your concerns about workers’ compensation liability.