How does stop-gap coverage protect employers?

  • By Paul Pukis Capital Asset Protection
  • Tuesday, March 26, 2013 3:57pm

Pirates, yes, pirates helped form our current system of workers compensation when they paid a certain number of Pieces of Eight (the Spanish dollar in the 18th century) for losing a body part while engaging in pirate activities.

For example, if you were a pirate on a ship that followed these guidelines, you would have received 100 pieces of eight for losing an eye or a finger. Or, if you lost your right arm, you would receive 600 pieces of eight. But, if you lost your left arm, you would have only received 500 pieces of eight. Even back then they knew right-handed people were better.

All kidding aside, pirates helped us get to the level we are today when it comes to taking care of employee injuries.

Washington happens to be one of only four states that believe a monopoly on protecting injured employees is the best way to go. This state fund provides worker’s compensation in Washington for all businesses with employees. In our monopolistic state for worker’s compensation, a unique coverage comes up on a business insurance policy. Employer’s liability or stop-gap insurance is an often misunderstood coverage but extremely critical for employers to understand.

Employer’s liability or stop-gap coverage provides protection for employers if sued by employees after being injured on the job. “Isn’t that what worker’s compensation is for?” you might ask. The answer is yes. And, if one reason worker’s compensation was created was to eliminate employees from suing their employer due to on-the-job injuries, how could the employer be sued?

There are two main ways employers can be sued if an employee is injured on the job even though they have worker’s comp. Each way comes from third parties. First, the employer can be sued by the family of the injured employee. Second, and the one we’ll briefly focus on in this article, is third-party over claims. When describing or defining most insurance terms and coverage, the best way to illustrate what something means is to give an example.

Bob, an employee, walks into a restricted area of a metal fabrication business. Bob is severely injured by a metal-cutting band saw. The Washington State Fund pays benefits under worker’s compensation but Bob also sues the manufacturer of the band saw. In the countersuit, the manufacturer sues the employer claiming negligence as the reason Bob was injured. This is the third-party over claim and stop-gap or employer’s liability is the coverage that would protect the employer from the countersuit by the manufacturer.

If you’re unsure how this coverage relates to your business, give us a call at Mosaic Insurance Alliance LLC. The coverage is relatively inexpensive but has the potential to be the only line of defense that protects your business.

For other questions about your business insurance, contact Paul Pukis at Mosaic Insurance Alliance LLC at 425-320-4280 or

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