February 5, 2023

Stop gap insurance is a type of insurance that employers in the United States can purchase to cover their costs should a lawsuit arise for an injury sustained at work. Normally, this liability insurance is covered by workers’ compensation insurance. However, in certain states, it is not. It is in these states that this additional coverage is needed.

In this article, we have demystified all the terms and concepts relating to stop-gap liability insurance to help you take an informed call. We suggest you browse reliable online resources to educate yourself further before shortlisting a provider for stop gap coverage on your staffing insurance policy.

  1. Bodily Injury at Work by Accident or Disease

“Bodily injury at work by accident or disease” refers to physical harm that occurs to an employee as a result of an accident or illness that occurs in the course of their employment. This type of injury can include things like broken bones, cuts, burns, and other types of physical trauma, as well as illnesses that are contracted as a result of exposure to hazardous materials or conditions in the workplace.

In 2022, over 421,400 employees in America were injured at work, reports Zippia.com, a career portal. Out of these, 32,470 employees missed at least a day of work after getting a sprain, tear, or strain. Thus, this is a common occurrence at any workplace in the US.

However, external parties can also sustain injuries at the workplace. A common example would be a customer coming in for a meeting and dislocating their hip by slipping on a wet floor. The costs for the lawsuit, should the injured party sue, will not be covered by workers’ compensation insurance, which is explained in the next section. These will be covered under liability insurance coverage.

  1. Workers Compensation Insurance

Workers’ Compensation Insurance, also known as workman’s comp, is a type of insurance that is required by most states in the United States for employers to carry. The purpose of this insurance is to provide financial assistance to employees who are injured or become ill as a result of their job.

Under workers’ compensation laws, employees who are injured or become ill on the job are entitled to receive benefits such as medical expenses, lost wages, and other types of financial assistance. In exchange for these benefits, employees usually have to surrender their right to file a lawsuit against their employer for negligence.

Employers are usually responsible for obtaining workers’ compensation insurance, either by purchasing a policy from an insurance company or by self-insuring. Employers are also responsible for providing notice to their employees about their rights under workers’ compensation laws and for reporting work-related injuries and illnesses to the appropriate state agency.

  1. Monopolistic States

The states of Ohio, Washington, North Dakota, and Wyoming do not allow businesses to purchase workers’ compensation insurance from a private player. The employers are mandated to purchase workers’ compensation insurance from the state fund.

These 4 states are collectively called monopolistic states. In these states, companies are recommended to purchase additional coverage in the form of stop-gap liability insurance. This will cover some of the situations that are not included in the state-provided insurance policy.

In special cases, companies can self-insure in a few of these states, subject to strict terms and conditions. Wyoming doesn’t allow self-insurance. It allows a deductible program where the deductibles range from $1,000 to $100,000.

  1. Stop Gap Liability Insurance

In some states, workers’ compensation insurance is provided by a state-run monopoly, which means that employers have limited options when it comes to purchasing workers’ compensation coverage. 

In these states, employers are required to purchase workers’ compensation insurance from the state-run monopoly, and they do not have the option of purchasing coverage from a private insurer. 

The State fund may not offer the same level of coverage as private insurers, but Stop Gap Liability Insurance can help fill the gap by providing additional coverage for employers. Stop Gap Liability Insurance can provide employers with additional coverage for things like legal fees and settlements that may not be covered by the state-run monopoly. It can also provide coverage for injuries or illnesses that are not covered by the state-run monopoly’s workers’ compensation policy.

  1. General Liability Insurance Policy

Stop Gap Liability coverage is usually an add-on to your general liability insurance policy. For the monopolistic states, businesses opt for the stop-gap option in their general liability insurance policy.

Ever since the lockdowns started due to the Covid-19 pandemic, there have been 5659 lawsuits filed due to coronavirus-related labor and employment policy violations, according to legal site Littler.com. 646 of these were class actions. Hence it is important you have a robust insurance policy in place to hedge against such risks.  

General liability insurance is a broad type of insurance that covers a wide range of potential liability claims, including those arising from accidents, errors and omissions, and property damage.

Some examples of situations where general liability insurance may provide coverage include the ones mentioned below:

  • A customer slips and falls on a wet floor in a store and sustains an injury
  • A product that a business manufactures is found to be defective and causes damage to a consumer’s property
  • A business employee accidentally damages a client’s property while working on a job site
  • A business is sued for copyright infringement
  • General liability insurance can also provide coverage for legal defense costs in case of a lawsuit. 

It is one of the most common types of insurance for small and medium-sized businesses, and it is also known as commercial general liability (CGL) insurance.

Stop-gap liability insurance is a type of insurance that fills in coverage gaps in an existing insurance policy. It is designed to provide additional coverage for businesses and organizations that are facing potential liability claims but whose current insurance policy does not provide adequate coverage.

It is a type of excess liability insurance that provides coverage when the limits of the primary insurance policy have been exhausted. It is important for businesses to understand their insurance needs and to consider purchasing stop-gap liability insurance to help protect against financial loss in the event of a claim.

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