The Workers’ Compensation Exclusion in the Comprehensive General Liability Policy

A business may purchase a comprehensive general liability or CGL policy to provide insurance against liabilities of the business for personal injury or property damage suffered by third parties and caused by the business. The usual form CGL policy has numerous exclusions, including Exclusion D — Workers Compensation and Other Laws.

Exclusion D applies to “any obligation of the insured under a workers’ compensation, disability benefits or unemployment compensation law or any similar law.” Such obligations are not insured against with a comprehensive general liability policy. Thus, to obtain insurance protection against the costs of liability arising under workers’ compensation and similar laws, a business must purchase coverage in addition to comprehensive general liability coverage.

In most states, such additional coverage for workers’ compensation is required. There is a trade-off for the additional coverage requirement in the limitation in workers’ compensation laws on claims against employers for pain and suffering and other common law causes of action and in the setting of limits for lost wages.

Local and state laws may impose obligations on businesses such as workers’ compensation laws to protect employees without regard to whether the business is responsible for an injury to the employee. Businesses should note that “similar law” refers to more than workers’ compensation and occupational disease laws designed to protect workers from the effects of on the job injuries. The phrase “similar law” refers also to laws that protect employees who suffer injury away from work but become disabled and unable to continue their employment.