Stop-Gap Coverage vs Employer's Liability
Four US states require workers compensation to be purchased exclusively from a state-run monopolistic fund: Ohio (BWC), Washington (L&I), North Dakota (WSI), and Wyoming. These state funds provide Part A statutory benefits (medical + lost wages) but typically do not include Part B Employer's Liability — the coverage that defends employer lawsuits arising from employee injury.
The gap is filled by Stop-Gap Coverage, a Part B Employer's Liability endorsement added to the employer's General Liability or BOP policy. Without it, employer lawsuits in monopolistic states are uncovered, leaving the business fully exposed to defense costs and judgments.
Side-by-side
| Dimension | Stop-Gap Coverage | Employer's Liability (WC Part B) |
|---|---|---|
| Where it applies | Only in monopolistic-fund states: OH, WA, ND, WY. (Some sources also list NJ partial monopoly but most consider it a competitive state.) Employers operating ANY employees in these states need Stop-Gap unless their state fund explicitly includes Part B coverage. |
In all 46 non-monopolistic states (and the rest of the country), Part B is bundled inside a standard WC policy automatically. The employer doesn't have to think about it separately. |
| What's covered | Employer lawsuits brought by injured employees alleging the employer's negligence caused or worsened the injury beyond what WC benefits cover. Specifically:
|
Identical coverage scope to Stop-Gap. The difference is purely structural: bundled with WC vs added as endorsement to GL/BOP. |
| How it's purchased | Endorsement to your General Liability or BOP policy. Usually a few hundred dollars per year added premium. Often automatic when the GL carrier knows the insured operates in a monopolistic state — but verify. |
Bundled inside the WC policy at the Part B section. No separate purchase. Limit options are standard: $100K/$500K/$100K (each accident / disease policy limit / disease each employee). Increase to $1M/$1M/$1M is typically a small additional premium. |
| Typical limit | Most Stop-Gap endorsements default to $100K/$500K/$100K limits matching standard Part B. Most agents quote with $1M/$1M/$1M limits available for ~$50-200/year additional premium. |
Same standard $100K/$500K/$100K default. Most agents recommend $1M/$1M/$1M for any meaningful business. Premium difference is modest; the exposure difference is large. |
| Common gap that surprises monopolistic-state employers | Employer assumes their state-fund WC includes employer-lawsuit coverage. It typically does NOT. State fund provides ONLY Part A. Employer sued by injured worker's family for loss-of-consortium discovers $0 coverage from state fund and no Stop-Gap on GL → personally exposed for entire defense + judgment. |
Employer in a non-monopolistic state assumes the Part B limit was raised when it wasn't. Standard $100K/$500K/$100K is inadequate for most serious injury claims. Raise to $1M/$1M/$1M at next renewal — modest premium increase. |
| What happens if I move to a monopolistic state mid-year | Notify your GL/BOP carrier immediately to add Stop-Gap endorsement at the new operations location. Standard endorsement; usually no underwriting delay. Notify your state fund (Ohio BWC, WA L&I, etc.) about the new operation per their procedure. |
Notify your WC carrier — they'll typically extend coverage to the new state via state-specific schedule if the carrier writes there. If you've moved INTO a monopolistic state, you'll need to drop WC at that location and shift to the state fund + Stop-Gap. |
Bottom line
If you operate employees in OH, WA, ND, or WY, verify your GL or BOP policy includes Stop-Gap Coverage. This is non-negotiable. State-fund WC alone leaves you exposed to employer-lawsuit claims that easily exceed $500K-$1M in defense costs and judgment.
In all other states, your standard WC policy bundles Part B Employer's Liability automatically. Review your declarations page — if the limit shows the default $100K/$500K/$100K, ask about upgrading to $1M/$1M/$1M. The premium increase is modest; the exposure difference can be career-changing.
Multi-state employers commonly need a mix — Stop-Gap endorsement on GL for their monopolistic-state operations, plus standard Part B in their WC policy for everywhere else. Read your declarations to confirm.
Related guides
Sources cited
- Stop-gap coverage / employer's liability endorsement — International Risk Management Institute (IRMI), 2024
- Workers' compensation state monopolistic funds — National Association of Insurance Commissioners (NAIC), 2024
- NCCI state-specific rules and independent bureaus — National Council on Compensation Insurance (NCCI), 2024