How to choose between Employer’s Liability Insurance and Personal Accident Insurance?

Company A did not take out the work-related injury insurance for its employees, but instead it took out a group accident insurance. Sun got injured at work. After Sun received the claim payment from the insurance company, he sued the company, demanding for the work-related injury insurance benefits. Company A defended that Sun had already received the claim payment from the insurance company, he should not be entitled to double compensation. However, both the court of first-instance and the court of second-instance supported Sun’s claim.

Company B did not take out the work-related injury insurance for its employees, but instead it took out an Employer’s Liability Insurance. Guo got injured at work. Because the company did not take out the work-related injury insurance, the company reached a settlement agreement with Guo. The agreement stated that the company would pay CNY400,000 to Guo as work-related injury compensation. Guo received CNY360,000 paid by the insurance company, and CNY40,000 paid by the company. However, Guo believed that the claim payment paid by the insurance company was based on the commercial insurance other than the work-related injury insurance, so the company had to pay another CNY 360,000. Guo sued the company, demanding that the company should pay the work-related injury benefits and economic compensation in full. The first-instance court supported Guo’s claims. The second-instance court pointed out that the commercial insurance taken out by the company was an Employer’s Liability Insurance, and the beneficiary was the company. Therefore, the CNY360,000 paid by the insurance company could be used to offset the compensation that the company should pay to Guo. Based on this, the second-instance court modified the judgment of the first instance, and ordered the company to only pay the economic compensation. Guo upheld the case to the Supreme People’s Court for retrial, and the Supreme People’s Court rejected Guo’s request.

As can be seen from the above cases, work-related injury insurance is a statutory insurance, and commercial insurance (especially personal accident insurance) cannot replace it. When an enterprise has paid work-related injury insurance, it could decide whether to purchase commercial insurance, or choose the commercial insurance at its own discretion based on its purpose.  

If an enterprise aims to provide better benefits for its employees, then group accident insurance should be chosen. Because the beneficiary of such insurance is usually an individual, and employees can directly receive the claim payment. Moreover, the protection scope of such insurance is not limited to work-related injuries and occupational diseases. For example, if an employee goes mountain climbing during the rest time while on a business trip and encounters an accident, such insurance can cover the claim. Under the same situation, the Employer’s Liability Insurance will not cover the claim. However, as shown in Case 1 at the beginning of this article, if an employee got injured at work, after receiving compensation from such insurance, the employee’s request for the employer to bear the work-related injury compensation liability would often be supported.

If a company aims to transfer its work-related injury compensation liability, then Employer’s Liability Insurance would be a better choice. The beneficiary of such insurance is generally the company, and the prerequisite is that there is an employment or labor relationship between the insured company and the insured individual. At the same time, the beneficiary of such insurance is usually the company, and the claim payment received by the company can be used to offset the compensation of the work-related injury insurance, thereby reducing the losses of the employer when a work-related injury occurs. In addition, the protection scope of such insurance is limited to work-related injuries and occupational diseases, which is much narrower than a group accident insurance. However, compared with the compensation liability of group accident insurance, the compensation scope of Employer’s Liability Insurance is wider. In addition to disability subsidies and medical expenses, employees can also receive compensation for one-time employment subsidies, charges for absence from work, nursing care expenses, and so on.