Why Workers’ Compensation Insurance is Not Enough for Your Small Business


Most small businesses are woefully under-insured and don’t realize it until a calamity occurs and they are being sued. This article will tell you why you may need commercial general liability insurance, commercial auto insurance, product liability insurance, and malpractice insurance, from the perspective of a South Jersey workers’ compensation attorney.

You Must Have Workers’ Compensation Insurance

Most states require employers with one or more employees to purchase workers’ compensation coverage. Workers’ compensation insurance provides you with immunity from liability for injuries from work-related accidents. This “no-fault” scheme eliminates the need for lawsuits and gets employees the medical treatment they need so that they can heal and get back to work for you.

If you do not carry workers’ compensation insurance and your employee is injured on the job, that employee can sue you in most states. A judge may impose punitive (i.e., punishing) damages upon you for your failure to maintain coverage. And in many states, that failure is a crime punishable with hefty fines and possibly incarceration.

If You Do Not Take Steps to Keep Your Employees Safe, You Can Be Sued Outside of Workers’ Compensation

If you turn a blind eye to potentially hazardous work conditions or otherwise make the workplace less safe by, for example, removing safety guards from equipment, you can be sued by an injured employee outside of the workers’ compensation system.

If you are accused of maintaining or allowing unsafe work conditions and sued, you need commercial general liability insurance, which can include premises liability. Let the Insurance company’s lawyers fight it out so that you can concentrate on running your business.

If a Third Party is Injured at Your Work Site, You Can Be Sued

If a client, customer, vendor, or passer-by is injured on or by your worksite, workers’ compensation insurance is not enough to shield you from liability because these people are not covered. Again, you need commercial general liability insurance coverage.

If Someone is Injured in an Accident with a Company Vehicle, You Can Be Sued

If an employee is driving a company vehicle and has an accident, the employee will be covered under workers’ compensation, but any third parties who are injured will not. If you have company vehicles that you drive or that employees drive as part of their work duties, you must have commercial auto insurance.

Commercial auto insurance is required in most states but think carefully about the amount of coverage you purchase. It should be enough to cover you for the type of accidents and injuries caused by the type of vehicles your business uses. For example, a company owning and using tractor-trailers or heavy construction vehicles may want more coverage than a company using two-door hatchbacks.

If the driver-employee alleges that you failed to maintain the vehicle in safe working conditions and that that failure caused the accident, that employee may be able to sue you outside of the workers’ compensation scheme. All the more reason to have commercial auto insurance.

If You Manufacture a Product, You Are Exposed to Product Liability Lawsuits

Any manufacturer, distributor, or seller of products should maintain product liability insurance, which provides coverage if a customer alleges that a product is defective. Someone injured by a defective product can sue any party in the line of distribution, so don’t be caught without insurance to protect you.

If You Provide a Professional Service, You Can Be Exposed to Malpractice Lawsuits

Many professional occupations, such as the practice of law and the practice of medicine, are highly regulated under state law. Part of that regulation is a mandate requiring members of those occupations to carry malpractice insurance, also called “errors and omissions” insurance.

Even if you are not required to carry malpractice insurance by law, consider what damages you expose yourself to if a client alleges that you made a professional error, causing them damages. Not only are you exposing yourself to liability for their damages, but you must take the time and energy to defend yourself. Let an insurance company do that for you.

The nature of your business will dictate the types of insurance you need. Talk with an insurance agent about the amount of coverage you need and about bundling the insurances to save you money on premiums.


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