For businesses with employees, workers’ compensation insurance is an essential part of protecting both the company and its workforce. But for businesses operating in certain states, there may be an important coverage gap that standard workers’ compensation insurance does not address.
That’s where Stop Gap Insurance comes in.
What Is Stop Gap Insurance?
Stop Gap Insurance is coverage designed to protect an employer from certain employer-liability claims that may not be covered under a traditional workers’ compensation policy.
In most states, workers’ compensation insurance includes both workers’ compensation benefits and employer’s liability coverage. However, Ohio, Washington, Wyoming, and North Dakota operate differently because they have state-administered workers’ compensation systems.
In Ohio, for example, employers generally obtain workers’ compensation coverage through the Ohio Bureau of Workers’ Compensation (BWC). Because the state system does not provide the same employer’s liability coverage found in a traditional workers’ compensation policy, an employer may need a separate policy or endorsement to address that exposure.
This coverage is commonly referred to as Stop Gap Insurance.
Why Does Stop Gap Coverage Matter?
Workers’ compensation generally provides benefits to employees who are injured or become ill as a result of their work. But there are situations where an employee may bring a claim against the employer alleging that the employer’s negligence contributed to the injury.
This is where employer’s liability coverage can become important.
Without appropriate Stop Gap coverage, a business could potentially be responsible for defending and paying certain claims that fall outside the protection provided by the state workers’ compensation system.
For example, imagine an employee is seriously injured while operating equipment at work. The employee receives workers’ compensation benefits, but later alleges that the employer failed to provide a safe working environment or adequate safety procedures.
Depending on the circumstances, a claim involving employer liability could create expenses beyond the employee’s workers’ compensation benefits. Stop Gap Insurance is designed to help protect the business against certain covered claims.
Who Needs Stop Gap Insurance?
Stop Gap coverage is particularly important for employers in states with state-run workers’ compensation systems, including Ohio.
Businesses with employees should work with their insurance professional to determine whether Stop Gap coverage is necessary and how much protection is appropriate for their particular operations.
It is especially important for businesses that:
- Employ workers in Ohio or another monopolistic workers’ compensation state
- Have employees working across multiple states
- Operate in higher-risk industries
- Have significant workplace exposures
- Have contracts requiring employer’s liability coverage
- Are growing or expanding into new states
Stop Gap vs. Workers’ Compensation
It’s important to understand that Stop Gap Insurance does not replace workers’ compensation insurance.
Workers’ compensation is designed primarily to provide benefits to employees who suffer covered work-related injuries or illnesses. Stop Gap coverage addresses a different exposure—the employer’s potential liability arising from certain workplace injuries.
Think of it this way:
Workers’ Compensation: Protects employees by providing benefits for covered work-related injuries and illnesses.
Stop Gap: Helps protect the employer against certain employer-liability claims arising from workplace injuries.
The two coverages work together to provide a more complete approach to managing workplace injury exposures.
What Happens If You Don’t Have It?
One of the biggest risks for a business is assuming that workers’ compensation coverage provides all the protection it needs.
If a business is operating in a state where Stop Gap coverage is necessary and does not have it, the employer could be left with an uncovered liability exposure. Legal defense costs, settlements, and judgments can become significant, particularly when a serious workplace injury is involved.
Even businesses with strong safety programs should consider this exposure. Insurance isn’t about expecting something to go wrong—it’s about making sure the business is prepared if it does.
The Bottom Line
Stop Gap Insurance may be a small part of an overall insurance program, but it can address a significant exposure for employers.
For Ohio businesses, understanding the difference between workers’ compensation and Stop Gap coverage is particularly important. Having the right coverage in place can help protect the business from unexpected employer-liability claims and provide greater confidence that its insurance program is designed around its actual risks.
A Better Insurance Experience Starts with a Conversation.
At Haughn Insurance, we can walk through your current workers’ compensation and liability coverage, identify potential gaps, and make sure your insurance program is keeping pace with your business.
Because having insurance is important—but having the right insurance is what really matters.
