What is employers liability coverage on a workers comp policy?

The standard workers compensation and employers liability policy in the Texas manual (WC 00 00 00 B) says the insurer "will pay all sums that you legally must pay as damages because of bodily injury to your employees," where the injury is covered by Part Two. The damages include:

1. Damages you owe a third party "by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee";
2. Damages for care and loss of services;
3. Consequential bodily injury to a spouse, child, parent, brother, or sister of the injured employee, as a direct consequence of the employee's work injury;
4. Damages for an employee's work injury "claimed against you in a capacity other than as employer."

The insurer also has the right and duty to defend covered suits. Texas attaches the Texas Amendatory Endorsement (WC 42 03 01) to every policy. Among other changes, it says two of the violation-of-law exclusions apply only if the violation caused or contributed to the injury, and it extends the temporarily-outside-the-country exception to residents of Mexico.

For a covered employer, Texas Labor Code Section 408.001(a) makes workers comp benefits the exclusive remedy of an injured employee against the employer. That is why employers liability claims in Texas usually come from the edges:

• Third parties. An injured employee can sue a third party, such as the operator, under Section 417.001. Under Section 417.004, the employer is not liable to that third party for reimbursement or damages "unless the employer executed, before the injury or death occurred, a written agreement with the third party to assume the liability." An MSA indemnity is that kind of agreement.
• Death claims. Section 408.001(b) preserves exemplary damages claims by a surviving spouse or heirs when a death was caused by an intentional act or omission or the employer's gross negligence. Ask how your employers liability and umbrella respond to that kind of claim.
• Family members and dual capacity. These are the other categories Part Two lists.

This is the part that trips up oilfield contractors. Part Two excludes "liability assumed under a contract," except a warranty that your work will be done in a workmanlike manner. So when your knock-for-knock MSA says you will defend and indemnify the operator for claims by your injured employees, employers liability is generally not the policy that backs that promise.

The general liability policy is. The ISO GL form excludes bodily injury to your own employees (exclusion e), but that exclusion "does not apply to liability assumed by the insured under an 'insured contract.'" An insured contract includes the part of any contract "under which you assume the tort liability of another party to pay for 'bodily injury' or 'property damage' to a third person or organization." IRMI's glossary describes third-party-over actions the same way: depending on the claim, coverage may fall under contractual liability on the commercial liability policy or under employers liability.

That is why the contractual liability on your GL and the indemnity in your MSA should be read together, with your attorney reviewing the indemnity itself. See also indemnity vs additional insured.

Rule VIII of TDI's Texas basic manual sets the standard Part Two limits and allows increased limits.

• Does your employers liability limit match each MSA, or does your umbrella schedule employers liability to make up the difference?
• Does the MSA require a waiver of subrogation on the workers comp and employers liability policy? In Texas that is endorsement WC 42 03 04. See the Texas workers comp waiver.
• Does your GL's contractual liability cover the employee injury indemnity your MSA requires?
• If you are a Texas nonsubscriber, you have no workers comp policy and no Part Two. See what a Texas nonsubscriber is.