Labor Letter - July 2012: Liability Beyond Your Workers' Compensation Coverage

by Fisher Phillips

[authors: Nicole Farley and Daniel O'Brien]

Pop quiz!

True or False? Workers' compensation is the exclusive remedy for employees pursuing a recovery against their employer. The answer is of course false. The exclusive remedy doctrine provides that when an employee is injured within the course and scope of employment, the employer's liability is limited to benefits payable under the state's workers' compensation statutes; mainly lost wages and medical benefits.

This doctrine was a trade off, giving employers "immunity" from being sued for their actions (or inactions) that resulted in injuries to employees. In return for this immunity, the employee's negligence would not be grounds to deny a workers' compensation claim. Instead, workers' compensation systems adopted the concept of "no fault" coverage.

While the no-fault end of the tradeoff has remained relatively unchanged, legislatures and particularly the courts have continued to chip away at the Exclusive Remedy doctrine. This erosion allows employees to bring suit against employers, outside of the workers' compensation system, under certain defined legal theories. Consequently, it generated uncertainty as to the insurability of suits brought by employees. A standard comprehensive-general-liability policy excludes coverage for any suit brought by an employee.

Dual Coverage Under Standard Workers' Compensation Policies

The insurance industry responded to this gap in coverage by expanding a standard workers' compensation policy beyond the scope of simply providing benefits for statutory workers' compensation issues. Workers' compensation policies now have two parts: Part One, (sometimes referred to as Coverage A) provides workers' compensation coverage; and Part Two,(sometimes referred to as coverage B) provides employer liability coverage.

Part One covers the benefits your company is required to pay under state law. There is normally no limit to this coverage. The insurer will pay all compensation and medical benefits your company is legally obligated to pay under your state's workers' compensation statutes, without limit. Part Two insures your company for the obligation to pay damages because of bodily injury by accident or disease, including death, if the condition arises out of and in the course of employment and if there is a legal-recovery theory available to the employee beyond the workers' compensation statutes.

Part Two, Employer Liability Coverage

At first glance, it may seem unlikely that any injury to an employee occurring while an employee is at work could fall outside the workers' compensation system. But there are a few potential situations in which an on-the-job injury can result in further liability beyond a comp claim. Some states have legal theories that will carve out exceptions to the exclusive-remedy doctrine and each state must be looked at individually. Outlined below are general areas of law in which Part Two coverage issues could arise.

Third-Party-Over Liability

Part Two provides coverage for suits filed by an employee against a third party where there is a contract between the employer and the third party which requires the employer to hold the third party harmless. These situations arise most often in the construction industry when a sub-contractor's employee is injured, files a workers' compensation claim and then sues an upstream contractor for failure to maintain a safe worksite. The upstream contractor then hands the suit off to the subcontractor/employer because the subcontractor/employer has agreed by contract to hold the upstream contractor harmless.

Because the suit is by an employee, the general-liability will not apply. However, Part 2 of the employer's workers' compensation policy almost certainly would provide coverage for the employer. There are other types of actions that would be considered third-party-over liability including potential subrogation actions against the employer by a third party that has been successfully sued by an employee.

Dual Capacity

Part Two coverage can apply in situations where you may be exposed to liability in a suit by an injured employee in a non-employer capacity. This is known as "dual capacity." An example of a dual capacity would be where the employee is injured during the course and scope of employment by a product that is manufactured by your company.

For example, an employee of a forklift manufacturer is using a forklift made by his or her employer to move product around a warehouse. The forklift malfunctions which results in injury to the employee. The employee files a workers' compensation claim and also sues the manufacturer (the employer) under a products-liability theory. Dual Capacity would allow the employee to maintain both the workers' compensation action and a lawsuit for product defect.

Intentional Tort

Where permitted under state law, employees may have a cause of action beyond a workers' compensation claim when an employee is injured at work and files suit against an employer alleging the intentional acts of the employer resulted in injury to the employee. These types of cases involve a common law cause of action for damages. As a practical matter, these suits may be defended under Part Two coverage because it is a question of fact as to whether or not the injury was caused by the intentional acts of the employer. In many jurisdictions, the concept of what constitutes an intentional act has been expanded beyond a deliberate intent to injure, to injuries that result from the willful indifference of the employer.

No Unified Theories

Many states have variations to the above three theories that allow employees to by-pass the exclusive remedy doctrine, including a number of states that allow a cause of action for "bad faith" when the employee can prove that workers' compensation benefits were inappropriately withheld. An interesting twist to employer's liability is the Texas system where employers are literally allowed to withdraw from the workers' compensation system altogether.

As noted above, not all injuries sustained in the course and scope of employment are exclusively covered by workers' compensation benefits. Employers need to look beyond Part One of their workers' compensation insurance contract and make sure they have broad adequate coverage under Part Two of the contract or under a separate employer's liability policy.

For more information contact either of the authors: email, or call (440) 838-8800.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.