Exclusive remedy

The exclusive remedy provision in a workers’ compensation insurance policy states that a worker cannot sue an employer for a work-related injury as long as they are receiving benefits from workers' comp, such as medical care and partial wage replacement. 

However, there are important limitations, exceptions, and responsibilities every employer should understand.

If an employee is injured while performing job duties, workers’ compensation typically pays for:

• Medical expenses
• Rehabilitation costs
• A portion of lost wages
• Disability benefits
• Death benefits for surviving family members

These benefits apply regardless of fault—even when accidents happen because of employee error.

For companies with just a few employees, one serious injury and claim could threaten the entire business. Workers’ comp and exclusive remedy help prevent that by:

• Limiting lawsuit exposure
• Providing predictable costs
• Ensuring employees get timely care
• Reducing friction between employers and workers after an accident

But the protection only works when employers maintain the right coverage and follow safety rules.

Exclusive remedy is strong, but not absolute. There are key situations where an injured employee may still bring a lawsuit against the employer or others involved.

If an employer’s actions go beyond simple carelessness—such as intentionally removing safety equipment, knowingly exposing employees to severe danger, or harming an employee on purpose—the legal shield may not apply.

If an employer doesn't purchase or maintain legally required coverage, the employee may be allowed to sue for damages in civil court.

Small businesses operating without valid workers’ comp may be exposed to extremely costly claims and severe penalties.

Exclusive remedy only protects the employer. An injured worker may still sue:

• A manufacturer of faulty equipment
• A negligent subcontractor
• A vendor or business partner whose actions caused the injury

This is common in trades, construction, cleaning, and businesses that rely on specialized equipment.

In some states, an employer who has another legal role, such as also being a product manufacturer or equipment provider, may be sued in that separate capacity.

State laws vary widely, and some courts are expanding the situations where exclusive remedy may not apply. Small business owners shouldn’t assume their state’s rules match those of others.

In recent years, courts in several states have broadened what counts as employer misconduct or allowed more claims to bypass exclusive remedy.

This trend means:

• Workers’ comp protections aren’t always guaranteed
• Injuries resulting from unsafe conditions could lead to lawsuits beyond workers’ comp
• Coverage decisions and maintaining compliance matter more than ever

This is especially important for small employers who may not have HR, safety, or legal teams monitoring these developments.

Insureon has helped thousands of small businesses compare quotes and purchase workers’ comp policies from leading U.S. carriers. Start our free online application today to protect your employees and business.