How to Manage Risk Using Construction Insurance & Bonds – Part 8: Workers’ Compensation and Employer’s Liability  

By AIA Contract Documents

February 2, 2023

One of the best ways to manage risk on construction projects is through insurance and bonds. Throughout the next several weeks, the AIA Contract Documents Program is going to release a series of articles pertaining to construction insurance. This is Part 8: Workers’ Compensation and Employer’s Liability.

What is the Difference Between Workers’ Compensation and Employer’s Liability?

Workers’ compensation insurance covers “injuries to employees suffered in the course of their employment.”[1] Between workers’ compensation and commercial general liability policies (discussed in Part 3), the majority of injury claims related to business operations are covered. However, there is a small gap in coverage for claims wherein neither the workers’ compensation nor the CGL policy will respond to an injury. For these claims, employer’s liability steps in.

Employer’s liability policies are “issued as part of the workers’ compensation policy [and] can fill the gap between workers’ compensation and CGL policies.”[2] Typically, for an employer’s liability policy to be triggered, an employee’s injury must be by accident or by disease, including death, and is not covered by workers’ compensation insurance, for whatever reason. The injury must also arise out of and in the course of employment and not be covered by the workers’ compensation.[3]

Do AIA Contracts Contain Insurance Requirements Related to Workers’ Compensation and Employer’s Liability?

Yes. The Insurance and Bonds Exhibit (Exhibit A) to A101-2017 requires the contractor to purchase and maintain both workers’ compensation and employer’s liability, as set forth in Sections A.3.2.5 and A.3.2.6:

A.3.2.5 Workers’ Compensation at statutory limits.

A.3.2.6 Employers’ Liability with policy limits not less than  ($    ) each accident,    ($    ) each employee, and    ($    ) policy limit.

Stay tuned for Part 9!

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.  

[1] Stephen D. Palley, et al, Construction Insurance: A Guide for Attorneys and Other Professionals, 22 (2011).

[2] Id.

[3] Id. at 129.