Workers Compensation

Employers Liability (WC Part B)

Q: Do I need Employers Liability if I have Workers Comp?

Yes — and you typically already have it. Employers Liability (Part B) is included as part of a standard Workers Comp policy in 46+ states. The question isn't IF you have it — it's whether the LIMITS are adequate. Default $100,000 per-accident / $500,000 disease policy / $100,000 disease per-employee is the minimum; modern small-business standard is $500,000 or $1,000,000 across all three limits. Step-up cost: $150-$485/year. Verify on your WC declarations page Section 3 (Item 3.B). In monopolistic states (OH, ND, WA, WY), you MUST buy Stop-Gap EL separately because state funds don't include Part B.

Q: What's the difference between Workers Comp Part A and Part B?

Part A (Workers Compensation Insurance) pays statutory medical + wage-replacement benefits DIRECTLY to the injured worker. It is NO-FAULT (covered regardless of who's at fault), UNCAPPED (state law sets benefit amounts, not policy limits), and operates as the EMPLOYEE'S exclusive remedy against the employer (they can't sue the employer in tort for work-related injuries in most cases). Part B (Employers Liability) pays YOUR defense + indemnity costs when someone (employee, spouse, family, third party) sues you OUTSIDE the statutory WC system. Part B has policy limits ($100K-$1M typically); Part A does not. Part B is extended by Commercial Umbrella; Part A is not. Both are typically included in a single Workers Comp policy.

Q: What is a third-party-over action and how does Part B respond?

A third-party-over action happens when: (1) Your employee is injured at a job site; (2) Your employee sues a third party (general contractor, property owner, equipment manufacturer) under regular tort liability; (3) That third party turns around + sues YOU as the employer alleging you were negligent in training, supervision, or safety. The third party invokes the contractual indemnity clause in your subcontract OR alleges common-law indemnification. This claim is OUTSIDE the WC exclusive-remedy doctrine because it's not the employee suing you — it's a third party. Part B Employers Liability provides defense + indemnity for these claims (defense usually inside limits). Adequate limits ($500K-$1M Part B + Commercial Umbrella) are essential for contractors, subcontractors, and any business that signs commercial agreements with indemnification clauses.

Q: What is Stop-Gap Employers Liability and who needs it?

Stop-Gap EL is a separate Part B coverage purchased by businesses operating in monopolistic states (Ohio, North Dakota, Washington, Wyoming, plus DC + Puerto Rico) where the state fund provides Part A statutory benefits but does NOT include Part B Employers Liability. Without Stop-Gap, businesses in these jurisdictions have NO defense or indemnity coverage for third-party-over actions, dual-capacity claims, loss-of-consortium suits, or intentional-act allegations from their employees. Stop-Gap is typically attached to the business's General Liability policy (most national carriers offer it) or via a specialty WC carrier. Annual cost: $50-$1,500 depending on payroll size + class. Standard limits start at $100K/$500K/$100K + step up to $1M for the same modest premium increases as conventional Part B.

By Jason Wootton · Edited by Justin Marks · Reviewed by Jason Wootton, NPN 7694718 Verify NPN ↗ · See disclosures ↓

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Definition. Workers Compensation has two parts: Part A (statutory medical + indemnity to injured employee, uncapped) and Part B (Employers Liability — lawsuits BY the employee or family).

Also known as: WC Part B, EL, Stop-Gap Employers Liability

Employers Liability (EL) is Part B of a standard Workers Compensation policy in 46+ states. It provides liability coverage for lawsuits brought by an injured employee, their family, or a third party that fall OUTSIDE the statutory WC system. Part A (statutory WC benefits) is paid no-fault + uncapped by state law; Part B (Employers Liability) pays for the narrow circumstances where the exclusive remedy doctrine does NOT block a lawsuit.

4 categories of Part B exposure: (1) Third-Party-Over Actions — injured employee sues a third party (general contractor, equipment vendor, building owner), and that third party turns around + sues YOU as the employer alleging negligent supervision or training. (2) Dual-Capacity Claims — employee sues you in a NON-employer role (you also manufactured the defective product that injured them, you also own the property where the injury occurred and were negligent as landlord). (3) Loss-of-Consortium Suits — employee's spouse / family files separate lawsuit for emotional damages from the injury. (4) Intentional / Egregious Conduct Claims — employee alleges intentional act, fraud, or gross negligence that pierces exclusive-remedy protection (varies by state).

Standard Part B limits + the Umbrella interaction: Default limits on most WC policies are $100,000 per accident / $500,000 disease policy aggregate / $100,000 disease per employee. Limits scale up to $500K/$500K/$500K or $1M/$1M/$1M for typical small business; premium add ~$50-$300/year per step-up. Commercial Umbrella + Excess policies CAN extend Part B (most umbrellas list Part B as scheduled underlying coverage) but typically require Part B at $500K/$500K/$500K minimum at the underlying level. Part A (statutory benefits) is NEVER extended by Umbrella — state-determined benefits are uncapped + paid by the WC carrier directly. In monopolistic states (OH, ND, WA, WY), the state fund does NOT include Part B — businesses MUST buy a separate Stop-Gap Employers Liability endorsement to fill that protection gap.

Real-world scenario

Vince is a hypothetical small-business owner; his scenario illustrates how Part A + Part B + Umbrella stack on a complex third-party-over claim. It is not based on a specific real customer, claim, or quote from any carrier.

Vince, residential framing subcontractor — Phoenix, AZ (hypothetical). 14-person crew (10 framers + 3 helpers + 1 foreman), ~$2.8M annual revenue, exclusively new-construction framing for two large home builders in metro Phoenix. His coverage package:

Workers Compensation Part A (statutory benefits, uncapped): payroll $1,420,000, NCCI 5645 framing rate $7.85/$100, EMR 1.05, LCM 1.45 = $169,830 base WC premium
Employers Liability Part B at $1M/$1M/$1M limits: +$485/year over standard $100K/$500K/$100K (worth every dollar)
General Liability $1M/$2M: $4,200/year (NCCI 91341 / framing class)
Commercial Umbrella $5M layer over GL + Auto + EL: $3,800/year (lists EL Part B at $1M as underlying)
Total annual P&C cost: $178,315 (~6.4% of revenue, typical for residential framing)

In April 2025 a framer falls 18 feet from a second-story scaffold + suffers traumatic brain injury, paralysis, + ongoing medical needs. The framer is alive but will need 24/7 care for life. Statutory PART A benefits (paid directly by Vince's WC carrier to the framer): $2.4M lifetime medical care projected + $890K lifetime TTD/PPD/PTD wage replacement = $3.29M Part A payout, uncapped, no Vince out-of-pocket.

The framer's wife files a separate $1.8M loss-of-consortium lawsuit against Vince personally (her separate cause of action survives exclusive remedy). Vince's Part B limit pays the first $1,000,000; Commercial Umbrella picks up the remaining $800,000. The home builder GC (sued by the framer under general-contractor-liability theory) then turns around + sues Vince under third-party-over action alleging negligent training + safety violations — demand $2,300,000. Defense costs alone reach $315,000 over 18 months. Part B pays the remaining limit + Umbrella picks up: $700K (remaining Part B after consortium settlement timing) + $1.6M settlement + $315K defense = $2.615M paid via the EL/Umbrella stack.

Total covered exposure across all three claim paths: $3.29M Part A + $1.8M consortium + $2.615M third-party-over = $7.705M paid by the insurance stack. Vince's personal out-of-pocket: $0 (all defense + indemnity within limits). Without the $1M Part B level (had he kept the $100K default), the consortium suit + third-party-over suit would have exhausted Part B in the first $200K + dropped his Commercial Umbrella to defending the rest — but most umbrellas REQUIRE $500K-$1M Part B as underlying, so a $100K Part B would have created a coverage gap forcing $400K-$900K of personal funding. The $485/year Part B step-up + $3,800/year Umbrella combined preserved $400K-$900K of personal liability exposure — an ~800x annual ROI when the catastrophic claim hit.

How it affects your premium

Employers Liability premium scales differently than Part A statutory benefits — it's exposure-based, not payroll-rate-based:

Part B limit selection — default $100K/$500K/$100K is cheap but inadequate for most modern small business. Step-up cost: $250K/$500K/$250K adds ~$50-$120/year; $500K/$500K/$500K adds ~$150-$250/year; $1M/$1M/$1M adds ~$300-$485/year. Single biggest underwritten difference between cheap + adequate EL coverage.
Class of business + workforce density — construction, manufacturing, transportation, healthcare, restaurants face HIGHER Part B exposure (more third-party-over potential, more dual-capacity scenarios). Clerical / professional-services classes face lower exposure. Carriers vary 30-80% on Part B step-up cost between classes.
Mod / claims history — Part B premium scales with Experience Modifier the same as Part A. High Mod (above 1.10) signals litigation risk + drives Part B step-up cost.
Underlying for Umbrella — Commercial Umbrella typically REQUIRES Part B at $500K-$1M as scheduled underlying. If your Umbrella requires $1M Part B + your WC has $100K Part B, you have a $900K gap that the Umbrella DOES NOT cover. The cost to fix: $300-$485/year on the underlying Part B step-up. The cost to NOT fix: $200K-$900K personal exposure at claim time.
Monopolistic-state Stop-Gap — in Ohio / ND / WA / Wyoming, the state fund provides Part A only. You MUST buy Stop-Gap Employers Liability separately (typically attached to GL or as a standalone): $50-$1,500/year depending on payroll size + class. Standard limits $100K/$500K/$100K; step-up to $1M typically adds $200-$500/year. Without Stop-Gap, monopolistic-state businesses have NO Part B coverage at all.
Standalone EL coverage — some specialty markets (notably in Texas where employers can opt-out of WC entirely) write standalone EL for non-subscribers: typical premium $2,500-$15,000/year depending on size + class. NOT a substitute for statutory WC but the only Part B available for opt-outs.
Defense costs treatment — most EL policies pay defense INSIDE limits (defense costs erode the policy limit). For high-stakes operations, request defense outside limits if the carrier offers it (premium add ~10-25%, preserves indemnity dollars).

Bottom line: the Part B step-up from default to $1M limits is one of the highest-ROI premium decisions in commercial insurance. Annual cost $300-$485; potential personal-liability protection $400K-$900K+.

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Common misconceptions

Myth: Workers Comp covers ALL employee-injury claims against my business — I'm fully protected by Part A.

Reality: Part A is uncapped but limited in scope. Part A pays statutory medical + indemnity benefits directly to the injured employee for work-related injuries — and the exclusive remedy doctrine typically prevents the employee from suing you in tort. But Part A does NOT cover: (1) lawsuits by the employee's spouse / family for loss of consortium (separate cause of action); (2) third-party-over actions by general contractors or property owners; (3) dual-capacity claims where you're sued in a non-employer role (product manufacturer, landlord, vendor); (4) intentional-act allegations that pierce exclusive remedy. Those four categories are PART B exposure — covered only if you have adequate EL limits + reach Commercial Umbrella for higher exposure.

Myth: I'm in Ohio so I have Workers Comp through the state fund — I have Part B too.

Reality: No — monopolistic state funds do NOT include Part B. In Ohio (BWC), North Dakota (WSI), Washington (L&I), and Wyoming, the state fund provides Part A statutory benefits ONLY. There is no Part B Employers Liability built in. To fill that gap, you MUST purchase a separate Stop-Gap Employers Liability endorsement (typically attached to your GL policy or via a specialty carrier). Annual cost $50-$1,500 depending on payroll + class. Without Stop-Gap, you have NO defense or indemnity coverage for third-party-over actions, dual-capacity claims, loss-of-consortium suits, or intentional-act allegations from your employees in those 4 states + DC + Puerto Rico.

Myth: My $100,000 Part B default limit is fine — claims rarely exceed that.

Reality: Modern claims regularly blow through $100K. Loss-of-consortium suits alone routinely settle $500K-$2M in serious-injury cases. Third-party-over actions from general contractors / property owners can demand $1M-$5M. Defense costs ALONE on contested EL claims regularly reach $100K-$400K (and most EL policies pay defense INSIDE the limit, eroding indemnity dollars). The premium difference between $100K and $1M Part B is typically $300-$485/year — and most Commercial Umbrellas REQUIRE $500K-$1M Part B as underlying. Step up to $1M Part B; it's one of the highest-ROI premium decisions in commercial insurance.

Myth: Commercial Umbrella will extend my Workers Comp coverage if a big claim hits.

Reality: Only partially. Commercial Umbrella + Excess policies extend Part B Employers Liability (typically requires $500K-$1M Part B as scheduled underlying) BUT do NOT extend Part A statutory benefits. Part A is uncapped by state law + paid directly by the WC carrier — no Umbrella involvement. The Umbrella scope: extends Part B above the underlying scheduled limit for the same exposures (third-party-over, dual-capacity, loss-of-consortium, intentional-act outside exclusive remedy). The result: catastrophic claims that involve BOTH statutory benefits (Part A — paid by WC carrier, uncapped) AND employer-liability (Part B + Umbrella — extends to umbrella limit). Adequate Part B underlying limit is critical for the Umbrella to attach properly.

Frequently asked questions

Do I need Employers Liability if I have Workers Comp?

Yes — and you typically already have it. Employers Liability (Part B) is included as part of a standard Workers Comp policy in 46+ states. The question isn't IF you have it — it's whether the LIMITS are adequate. Default $100,000 per-accident / $500,000 disease policy / $100,000 disease per-employee is the minimum; modern small-business standard is $500,000 or $1,000,000 across all three limits. Step-up cost: $150-$485/year. Verify on your WC declarations page Section 3 (Item 3.B). In monopolistic states (OH, ND, WA, WY), you MUST buy Stop-Gap EL separately because state funds don't include Part B.

What's the difference between Workers Comp Part A and Part B?

Part A (Workers Compensation Insurance) pays statutory medical + wage-replacement benefits DIRECTLY to the injured worker. It is NO-FAULT (covered regardless of who's at fault), UNCAPPED (state law sets benefit amounts, not policy limits), and operates as the EMPLOYEE'S exclusive remedy against the employer (they can't sue the employer in tort for work-related injuries in most cases). Part B (Employers Liability) pays YOUR defense + indemnity costs when someone (employee, spouse, family, third party) sues you OUTSIDE the statutory WC system. Part B has policy limits ($100K-$1M typically); Part A does not. Part B is extended by Commercial Umbrella; Part A is not. Both are typically included in a single Workers Comp policy.

How does the Commercial Umbrella interact with Employers Liability?

Commercial Umbrella + Excess policies typically extend Part B Employers Liability + other liability coverages (GL, Commercial Auto, sometimes Liquor Liability) above the underlying limit up to the Umbrella's own limit. Standard configuration: $1M underlying GL + $1M Auto + $1M EL + $5M Umbrella = $6M total liability stack. The Umbrella SCHEDULES specific underlying policies — if your WC Part B is at $100K but the Umbrella requires $500K-$1M Part B as underlying, you have a coverage GAP that the Umbrella does NOT cover. Always verify your Umbrella's required underlying limits match your actual WC Part B limit. Part A statutory WC is NEVER extended by Umbrella — it's uncapped by state law + handled separately.

What is a third-party-over action and how does Part B respond?

A third-party-over action happens when: (1) Your employee is injured at a job site; (2) Your employee sues a third party (general contractor, property owner, equipment manufacturer) under regular tort liability; (3) That third party turns around + sues YOU as the employer alleging you were negligent in training, supervision, or safety. The third party invokes the contractual indemnity clause in your subcontract OR alleges common-law indemnification. This claim is OUTSIDE the WC exclusive-remedy doctrine because it's not the employee suing you — it's a third party. Part B Employers Liability provides defense + indemnity for these claims (defense usually inside limits). Adequate limits ($500K-$1M Part B + Commercial Umbrella) are essential for contractors, subcontractors, and any business that signs commercial agreements with indemnification clauses.

What is Stop-Gap Employers Liability and who needs it?

Stop-Gap EL is a separate Part B coverage purchased by businesses operating in monopolistic states (Ohio, North Dakota, Washington, Wyoming, plus DC + Puerto Rico) where the state fund provides Part A statutory benefits but does NOT include Part B Employers Liability. Without Stop-Gap, businesses in these jurisdictions have NO defense or indemnity coverage for third-party-over actions, dual-capacity claims, loss-of-consortium suits, or intentional-act allegations from their employees. Stop-Gap is typically attached to the business's General Liability policy (most national carriers offer it) or via a specialty WC carrier. Annual cost: $50-$1,500 depending on payroll size + class. Standard limits start at $100K/$500K/$100K + step up to $1M for the same modest premium increases as conventional Part B.

Sources cited

Employers liability coverage (EL) — International Risk Management Institute (IRMI) (2024)
Workers' Compensation — National Association of Insurance Commissioners (NAIC) (2024)
Workers' Compensation Insurance — Insurance Information Institute (III) (2024)

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Disclosures

📘 Educational content only. Reviewed by licensed Property & Casualty insurance agent Jason Wootton (NPN 7694718). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.

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