Common Exclusions Under Employers Liability Insurance

In the standard Workers Compensation and Employers Liability policy, Part Two (Employers Liability) serves as a critical "gap filler." While Part One provides statutory benefits regardless of fault, Part Two protects the employer when an employee—or a third party—sues the employer for negligence related to a work injury. However, Part Two is not an all-encompassing liability policy. It contains specific exclusions designed to prevent overlap with other types of insurance and to exclude coverage for non-accidental or illegal acts.

For candidates preparing for the complete Workers Comp exam guide, understanding these exclusions is essential. Examiners often test the distinction between what is covered by statutory workers compensation and what is explicitly excluded from the liability portion of the policy.

The following exclusions are standard across most NCCI-based Workers Compensation policies. These ensure that the policy focuses strictly on the employer-employee relationship regarding accidental bodily injury.

• Statutory Obligations: Part Two excludes any obligation for which the insured or their insurer may be held liable under any workers compensation, disability benefits, or unemployment compensation law. This prevents double recovery.
• Liability Assumed Under Contract: Employers Liability insurance does not cover liability that the employer assumes under a contract. For instance, if an employer signs a lease agreement promising to indemnify a landlord for injuries to employees, that specific contractual obligation is generally excluded and should be covered under a Commercial General Liability (CGL) policy.
• Intentional Acts: Part Two is designed for accidental injury. If an employer intentionally causes bodily injury to an employee, the policy will not provide defense or indemnity. This is a matter of public policy to prevent individuals from insuring against their own criminal or intentional wrongdoing.
• Injuries Occurring Outside the Coverage Territory: Coverage typically applies to the United States, its territories or possessions, and Canada. Injuries occurring outside these areas are generally excluded unless the employee is a citizen/resident of the US/Canada and is only away temporarily.

Beyond the major categories, there are several other nuances that candidates should master for practice Workers Comp questions:

• Punitive or Exemplary Damages: Many states prohibit the insurance of punitive damages (damages meant to punish the employer for gross negligence). Even where allowed, Part Two often excludes these unless they are specifically included by endorsement.
• Employment of Minors: If an employer knowingly employs a minor in violation of the law, and that minor is injured, Part Two may exclude coverage for the resulting legal liability.
• Federal Laws: Injuries covered by federal acts, such as the Longshore and Harbor Workers' Compensation Act or the Jones Act, are excluded from standard Part Two coverage unless a specific endorsement is added.

Understanding these exclusions helps define the boundary between Workers Compensation and other commercial lines, such as General Liability and Professional Liability.