The Important Role Stop Gap Coverage Plays

Stop gap coverage can be a beneficial policy for your staffing agency clients to protect them and all their interests. Considering that 2.6 million nonfatal injuries happen on the job, according to the U.S. Department of Labor, it makes it imperative for business owners to have the right workers’ compensation coverage. Ohio, North Dakota, Washington, and Wyoming clients may get a special stop gap endorsement. 

The Definition of Stop Gap

In most states, a company’s liability insurance kicks in if an injured employee decides to file a lawsuit. In monopolistic states, worker’s compensation policies do not include liability insurance. The company must secure liability insurance through a state fund. That leaves a gap, which could lead to devastating out-of-pocket expenses. Stop gap coverage fills that gap, providing business owners added peace of mind in an age where lawsuits happen frequently.

  • Besides getting this coverage in state-funded worker’s compensation states. Companies in other states may benefit from this additional layer of coverage, such as:
  • Businesses in industries with higher rates of death or injury
  • Businesses that operate in multiple states
  • Small businesses without the assets to cover an expensive lawsuit and settlement
  • Businesses that have had numerous claims filed against them

The Importance of Stop Gap Coverage

Your clients may wonder what is the purpose of stop gap coverage. Stop gap focuses on providing coverage in the case of a lawsuit. While no business wants to get sued, it happens frequently regardless of the size of the operation. This coverage eases the situation by minimizing court costs, legal fees, judgments, and settlements.

This coverage does not just stop at workers’ compensation claims. Other lawsuits stop gap insurance can assist businesses with include:

  • Third-Party Liability: An injured person may sue a third party instead of the employer that provides worker’s comp.
  • Loss of Consortium: The family of a person killed or injured may sue a business for lost benefits.
  • Consequential Injury: A family member may file a lawsuit that the injured employee’s injury caused them to have medical conditions, such as a heart attack or stroke.

The Exclusions Associated With Stop Gap

While this endorsement provides many benefits in the event of a lawsuit, it does often come with exclusions. If an employer intentionally causes or takes actions that lead to an illness or injury, it will not get covered by the stop gap endorsement. Additional coverage exclusions include:

  • Companies with fines or penalties from any regulatory agencies
  • Injuries that happen under contractual liability
  • Employers who have unlawfully employed an injured person
  • Companies not in compliance with workers’ comp law

Luckily, most businesses ready to invest in protecting themselves adhere to the laws of the state and follow strict protocols, making those exclusions often something not to worry about.

When working with clients on adding a stop gap endorsement, providing options and helping develop a custom insurance plan makes a big difference. Whether adding as an endorsement to an existing policy or crafting a stand-alone policy, the multitude of potential exposures and their costly aftermath make this coverage essential to obtain.

About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.