What Is Stop-Gap Coverage in Ohio?
Understand Ohio's stop-gap coverage. Learn how this crucial insurance protects employers from specific lawsuits not covered by standard workers' comp.
Workplace injuries can present complex challenges for businesses, typically addressed by workers’ compensation insurance. While this coverage provides benefits to injured employees, employers may still face certain liabilities not covered by standard policies. This article explains “stop-gap coverage,” a specialized insurance product, and its particular relevance for businesses operating in Ohio.
Defining Stop-Gap Coverage
Stop-gap coverage is a specific type of employer’s liability insurance designed to protect businesses from lawsuits brought by injured employees that are not covered by traditional workers’ compensation. It functions to fill a “gap” in coverage, addressing liabilities beyond the scope of workers’ compensation benefits. It is also known as employer’s liability insurance, which is typically included within workers’ compensation policies in most states.
Ohio’s Workers’ Compensation System
Stop-gap coverage holds particular significance in Ohio due to the state’s unique workers’ compensation system. Ohio operates a monopolistic state fund, meaning employers generally purchase workers’ compensation insurance directly from the Ohio Bureau of Workers’ Compensation (BWC), rather than from private insurers. This contrasts with most other states where private companies offer competitive workers’ compensation policies.
While the BWC provides statutory workers’ compensation benefits for injured workers, its policies typically do not include employer liability coverage. Employers in Ohio often need to secure additional coverage. Ohio is one of only four states, along with North Dakota, Washington, and Wyoming, that utilize this monopolistic structure.
Scope of Stop-Gap Coverage
Stop-gap coverage addresses various claims and damages not encompassed by standard workers’ compensation. It covers instances where an injured employee or their family sues the employer directly for negligence or other torts. For example, it can cover claims alleging gross negligence, unsafe working conditions, or failure to provide adequate safety measures.
This coverage is distinct from the direct medical and wage benefits provided by workers’ compensation, as it specifically covers legal expenses, settlements, and judgments for claims such as pain and suffering or loss of consortium. It also protects against “third-party over actions,” where an injured employee sues a third party who then seeks indemnity from the employer. The policy can cover defense costs, including attorney’s fees and court costs, even if the lawsuit is ultimately dismissed.
Obtaining Stop-Gap Coverage
Employers in Ohio typically acquire stop-gap coverage as an endorsement to a commercial general liability (CGL) insurance policy, rather than as a standalone policy. This endorsement is often referred to as an “Employer’s Liability Endorsement” or “Ohio Stop-Gap Endorsement.”
Working with an insurance broker or agent can help tailor the coverage. Factors influencing the cost of this coverage can include the employer’s industry, overall payroll, and past claims history.