Understanding Contingent Employers Liability Insurance Coverage

Workplace injuries are more common than you might think. According to the National Safety Council, in 2017, a worker was injured on the job every seven seconds, leading to billions of dollars in losses annually for businesses.

While workers’ compensation helps cover many of these claims, gaps in coverage can leave companies vulnerable to lawsuits and financial setbacks.

Navigating these risks requires a proactive approach to liability protection. As businesses face increasing challenges in managing employee-related claims, it’s essential to understand where your current coverage might fall short.

In this post, we’ll explore what contingent employers liability insurance (CEL) is, what it covers, and why it’s a critical component of a robust risk management strategy.

What is Contingent Employers Liability Insurance?

Contingent Employers Liability Insurance is a specialized type of insurance that protects businesses from legal liabilities arising from employee injuries or illnesses sustained while working under circumstances not covered by standard workers' compensation policies. 

This type of insurance is especially relevant for businesses that frequently work with contractors, subcontractors, or temporary workers. 

What Does Contingent Employers Liability Insurance Cover?

Contingent Employers Liability Insurance (CEL) protects your business from a variety of claims related to workplace injuries, illnesses, or deaths that fall outside the scope of workers’ compensation. 

This type of coverage ensures you’re prepared for unexpected lawsuits and financial risks. Here’s what CEL typically covers:

• Third-party lawsuits: If an injured employee sues a third party (e.g., an equipment manufacturer), and the third party then sues your business for negligence, CEL can cover the resulting legal and settlement costs.
• Loss of consortium claims: Family members of an injured or deceased employee may file lawsuits seeking compensation for their personal loss, such as emotional distress or loss of financial support. CEL provides coverage for these types of claims.
• Consequential bodily injury claims: Non-employees, like a family member, who suffer injuries or illnesses as a result of caring for an injured employee can seek compensation. CEL helps cover these costs.
• Dual-capacity lawsuits: If an employee sues your business not just as an employer but also in another role—like as the owner of the premises or manufacturer of a product—they may claim damages under this dual capacity. CEL offers protection in such cases.
• Legal defense costs: CEL covers attorney fees and court costs if an employee or their family sues your business for additional damages beyond workers’ compensation.

What is Not Covered by Contingent Employers Liability Insurance?

‍Knowing what CEL doesn’t cover can help you identify any gaps in your insurance plan and ensure your business is fully protected. Here’s what CEL typically does not cover:

• Intentional acts: CEL does not cover claims resulting from deliberate actions, such as intentionally harming employees or knowingly violating workplace safety standards.
• Fraud or criminal activity: If your business engages in fraudulent practices or illegal activities that lead to employee harm, CEL will not cover the associated claims or costs.
• Claims unrelated to negligence: CEL only applies when negligence is proven. It does not cover claims related to no-fault situations or disputes without evidence of employer responsibility.
• Discrimination, harassment, or wrongful termination: CEL does not protect against lawsuits involving allegations like workplace discrimination, sexual harassment, or wrongful termination. You would need Employment Practices Liability Insurance (EPLI) for these types of claims.
• Injuries outside approved jurisdictions: CEL often excludes claims for incidents outside the U.S. or Canada, depending on your policy.
• Workforce reductions or restructuring: Claims resulting from layoffs, downsizing, mergers, or other workforce changes are not covered under CEL.

At TWFG Khan Insurance, we understand that no single policy can cover every risk your business faces. While Contingent Employers Liability Insurance provides essential protection, addressing the gaps CEL doesn’t cover is important.

Our experts can help you evaluate your current coverage, identify potential vulnerabilities, and recommend additional policies, such as Employment Practices Liability Insurance, to protect your business. You can confidently navigate even the most complex insurance requirements with our guidance.

‍What is the Cost of Contingent Employers Liability Insurance?

‍While costs vary, small to medium-sized businesses might pay anywhere from $500 to $1,500 annually for CEL coverage. High-risk industries or larger businesses could see premiums exceeding this range, depending on their specific risk factors.

Contingent Employers Liability Insurance (CEL) costs depend on several factors unique to your business. Here are the key factors that influence the cost of CEL:

• Business size: Larger businesses with more employees generally face higher premiums due to increased risk exposure.
• Industry type: High-risk industries like construction, oil and gas, or maritime typically have higher premiums because of the nature of their operations.
• Location: Where your business operates affects your premiums. States with higher workplace injury rates or stricter legal requirements may lead to higher costs.
• Claims history: If your business has a history of workplace claims or lawsuits, insurers may charge more for CEL coverage.
• Level of coverage: Higher coverage limits and additional protection often increase the policy cost. Businesses can choose coverage tailored to their specific needs.
• Annual revenue: Companies with higher revenue may pay more for CEL due to their larger operations and potential for greater liability exposure.

How to Lower Your Premium?

• Invest in workplace safety: Implement strong safety measures to reduce the likelihood of claims.
• Review and update policies regularly: Ensure your coverage matches your business needs without overpaying for unnecessary add-ons.
• Maintain a clean claims record: Avoid frequent claims by fostering a safe work environment.

Example of a Contingent Employers Liability Insurance Claim

‍Let's look at a real-world scenario to understand how Contingent Employers Liability Insurance (CEL) protects your business.

‍Scenario: Dual-capacity Lawsuit at a Manufacturing Facility

‍An employee working in your manufacturing facility gets injured when a piece of heavy equipment malfunctions, causing a serious hand injury. The employee files a workers’ compensation claim to cover medical expenses and lost wages. 

However, they also decided to sue your company, claiming the injury occurred because the equipment wasn’t maintained properly.

In addition to suing you as their employer, the employee files a dual-capacity claim, arguing that you are also responsible as the manufacturer of the faulty equipment.

‍How CEL helps:

‍Without CEL, your business would face significant out-of-pocket expenses to cover:

• Legal fees to defend against the employee’s dual-capacity lawsuit.
• Any settlement or court-ordered compensation for pain, suffering, or additional damages beyond what workers’ compensation covers.

With CEL in place, your insurance policy covers:

• Legal defense costs: CEL pays for attorney fees, court filings, and other legal expenses.
• Settlement or damages: CEL provides funds for any settlement or judgment awarded to the employee.

Why Choose TWFG Khan Insurance for Contingent Employers Liability Insurance?

‍At TWFG Khan Insurance, we understand the unique risks businesses face when it comes to employee-related liability. Our expertise in Contingent Employers Liability Insurance ensures your business stays protected, no matter the challenge.

‍Here’s why businesses trust us with their liability coverage:

• Tailored coverage for high-risk industries: We specialize in creating custom policies for businesses in construction, maritime, and oil and gas, where standard insurance isn’t enough.
• Comprehensive risk assessment: Our team evaluates your business operations thoroughly to identify coverage gaps and recommend the best solutions for your needs.
• Access to top-rated carriers: We work directly with leading insurance providers to secure policies that offer robust protection at competitive rates.
• 24/7 claims support: We know incidents can happen anytime, so we’re always here to guide you through the claims process and ensure timely resolutions.
• Expert guidance: With years of experience serving businesses like yours, we provide clear advice to help you navigate complex liability risks.

Don’t leave your business vulnerable to unexpected claims. Let TWFG Khan Insurance protect your operations with Contingent Employers Liability Insurance tailored to your specific needs.

‍Get a quote with us and secure your peace of mind today.