What is stop gap coverage?

Stop gap coverage is used by businesses to cover litigation by employees who receive injuries on the job. Although workers’ compensation insurance covers work-related injuries and illness, not all states provide policies that include employers liability insurance, which protects an employer if an employee sues for amounts beyond what workers’ compensation covered. Stop gap coverage provides protection in these situations.

Employers in certain states have gaps in liability coverage and should purchase stop gap coverage to protect them from employee lawsuits. Potential lawsuits that are covered by gap insurance include dual capacity actions, third-party suits, public tort claims, intentional endangerment, and injury claims.

Learn more about stop gap coverage

When do I need to be aware of stop gap coverage?

If you are a business owner in a state that does not offer employers liability insurance, you need to be aware of stop gap coverage. For example, if you live in North Dakota, which does not have liability insurance, you will want to purchase gap coverage. This would protect you in the event an employee gets injured on the job and sues you for medical care and wage loss not covered by regular workers’ compensation insurance. Workers compensation coverage provided by state funds may have limitations, making it crucial to understand and address these gaps with the help of an insurance agent.

What is important to know about stop gap coverage?

Not all employers know about stop gap coverage, but it is important to understand it, especially if you own a business in certain states. There are some other important items you should know about stop gap coverage:

Stop gap coverage is required in monopolistic states that do not offer employers liability insurance, and currently these four states are North Dakota, Ohio, Washington, and Wyoming.
In the other states that are not monopolistic, stop gap coverage is folded into an employer’s workers’ compensation policy.
Gap insurance covers an employer if:
- an employee opted out of workers’ compensation benefits
- the employee has an illness unrelated to employment
- the business is an industry that does not have workers’ compensation or
- the employer failed to provide a safe environment that resulted in injury

Benefits of stop gap insurance

The benefits of stop gap insurance are numerous, including:

Financial protection against employee lawsuits. Peace of mind for business owners, knowing they have adequate protection against potential lawsuits
Defense costs coverage, including attorneys’ fees and court costs
Protection against allegations from employees or their families that the employer has not provided a safe work environment
Ability to customize coverage to meet the specific needs of the business

Obtaining stop gap coverage

Obtaining stop gap coverage is a straightforward process. Business owners can add it to a general liability insurance policy from a private insurance provider. This coverage is highly recommended for employers in monopolistic states who do not have employer’s liability insurance in their workers’ comp policy. By comparing quotes from top insurers, business owners can find the best stop gap coverage for their business, ensuring they have the necessary protection against potential lawsuits