Stop gap coverage: the employer's liability gap in the four state-fund workers' comp states

What does stop gap coverage pay for?

Stop gap pays damages and defense costs when someone sues the company over a worker’s injury, which the state fund’s benefits do not cover. In the private-market workers’ comp policy, that job belongs to Part Two, employers’ liability. Part Two of the standard form (WC 00 00 00 B) lists four kinds of claim:

• Third-party-over claims. A third party the injured worker sued turns around and claims against the employer for its loss.
• Care and loss of services. A claim for the cost of caring for the injured worker, or for the lost services.
• Family claims. Consequential injury to the worker’s spouse, child, parent, brother or sister.
• Dual capacity. A claim against the company in some capacity other than employer.

Washington’s Department of Enterprise Services describes the stop gap coverage it buys in similar terms, as protection against an outside party’s lawsuit over an employee’s work accident. Its limits are $1,000,000 for bodily injury by accident, $1,000,000 for disease per employee and $1,000,000 for disease per policy. The workers’ comp guide covers how coverage works in every other state.

Why isn’t it already in your general liability policy?

The standard ISO general liability form excludes it. Exclusion e in form CG 00 01 04 13 removes bodily injury to an employee that arises from the job, and the resulting injury to that employee’s family members, which the form lists as spouse, child, parent, brother or sister. It applies whether the insured is liable as an employer or “in any other capacity,” and it also covers a duty to split damages with, or pay back, anyone else who must pay because of the injury. A neighboring exclusion removes obligations under workers’ compensation laws. Stop gap is an endorsement that gives the employer’s liability piece back to the general liability policy, and King County Public Health’s insurance page treats it as the stand-in for Part Two where a state runs a monopolistic fund. See general liability insurance for NEMT for what the policy covers without it.

Which states are the four, and what does each say?

The four are North Dakota, Ohio, Washington and Wyoming, where the state runs workers’ comp and private insurers may not cover in-state workers. Washington’s Department of Enterprise Services names the other three as monopolistic states like Washington.

• North Dakota. Workforce Safety and Insurance is the sole provider, and state law bars private insurers from writing the coverage. Its account memo states that WSI’s “coverage does not include general or employers’ liability insurance,” so a contract’s employer’s liability line has to be met on the general liability policy.
• Ohio. Private employers pay premium into the state insurance fund unless they self-insure (ORC 4123.35). A compliant employer is not liable to respond in damages at common law or by statute for covered injuries (4123.74), but an employee can sue for an intentional tort by proving deliberate intent to injure (2745.01). Section 4123.82 voids contracts that insure an employer against damages from failing to meet a lawful safety requirement or from a willful act of the employer, its officers or agents. Ask your agent how the endorsement treats intentional tort claims.
• Washington. L&I says the state does not allow private workers’ comp coverage and that, in most cases, a business cannot be sued over a work injury. The statute leaves two doors open: a worker may sue a third person outside the same employ (RCW 51.24.030), and an employer’s deliberate intention to cause an injury opens a second door, because that worker may sue the employer for whatever exceeds the Title 51 benefits (51.24.020).
• Wyoming. The Department of Workforce Services administers workers’ comp. Coverage is required before work begins only in extra-hazardous industries, which the department sorts by NAICS code, and other businesses may choose it.

Which contracts require stop gap, and how much?

The three public contracts below all set the limit at $1,000,000:

• home52. The Council on Aging of Southwestern Ohio’s requirements for its transportation providers list “Employers/Stop-Gap Liability coverage of $1,000,000” alongside general liability limits of $1 million each occurrence and $2 million in the annual aggregate. Subcontractors must carry the same amounts. The file is labeled 10.2023.
• Hamilton County Job and Family Services. Its December 2, 2025 request for proposals for non-emergency Medicaid transportation requires workers’ compensation at the statutory limits plus an employer’s liability line with limits of at least $1,000,000 for each accident, covering injury or disease. The line does not say stop gap, so ask the county or your agent whether a stop gap endorsement meets it.
• King County Public Health. Contractors with employees keep stop gap or employers’ liability of $1,000,000 each occurrence when it applies to the scope of work.

How to add it

Ask your agent three things in writing:

1. Is a stop gap endorsement on my general liability policy, and at what limits?
2. Do those limits match each contract that asks for employer’s liability?
3. Does my umbrella policy list employer’s liability among the underlying coverages it sits over?

If a contract also asks you to waive subrogation or to list the owner as an additional insured on workers’ comp, North Dakota’s fund will do neither, so see the waiver of subrogation entry and the workers’ comp guide before you accept those terms.