What will workers’ compensation insurance protect you against in 2026?

Quick summary

• Employers’ liability insurance mainly covers damage caused by negligence at work.
• For ordinary negligence, the employee’s liability is usually limited by law.
• The policy typically does not cover intentional damage, alcohol and other serious exclusions.
• It is especially worthwhile where you work with more expensive equipment, cars, data or liability for larger values.
• The key is to address not only the cost of the policy, but also the benefit limits and exclusions.

If your employer requires you to pay damages or the insurance company refuses to pay, we can help you legally assess the situation, prepare a demand letter and suggest a course of action.

Employment Practices Liability Insurance

You may think you don’t need anything like this. You don’t come into contact with money and you don’t drive a car, so what damage can you cause? Don’t be fooled, it’s quite easy. Damage can be caused, for example, by a wrong instruction to a subordinate, spilling coffee on your computer or losing your mobile phone. You can also cause damage by mixing up units or adding a zero to an order. Liability insurance is suitable not only for high-risk professions, but also for regular office positions where damage can occur, for example, through faulty typing or careless handling of equipment. Employment practices liability insurance provides protection in all common situations where damage occurs in connection with the performance of job duties or at the direction of the employer.

Any profession can be insured, whether you are required by law to do so or are just prudent and prudent. In general, insurance is always recommended for those whose occupation involves signing a material liability agreement, you are entrusted with expensive equipment or gadgets, or you may directly affect the health and lives of people or animals.

A crap insurance policy is thus an affordable way for an employee to protect themselves from unexpected expenses associated with minor and more costly mistakes on the job. Workers’ compensation insurance helps cover the consequences of unexpected situations where an employer demands payment for damages, significantly reducing the employee’s financial risk.

The insurance benefit is then usually paid directly by the insurance company to the employer. If you have already paid the claim yourself, the amount can also be transferred to your account. Of course, the insurance cover only applies to the damages that your employer actually wants you to pay for.

If the insurance company refuses to pay, appeal. Sometimes insurance companies just try to see what the client can bear. And if even your appeal doesn’t help, don’t be afraid to get legal help.

From a legal perspective, you need to distinguish between different forms of liability. In employment law, it is primarily the employee’s liability for damage caused by the employer, which applies to cases where a causal link between the performance of work and the occurrence of damage is met. If the injury occurs during the performance of work tasks, the employee may face a financial claim from the employer, and this is where insurance plays its protective role.

Car insurance gets more expensive

Of course, it’s not necessary to run to the insurance company and think about insurance for every potential claim. It’s worth taking stock of what work equipment you come into contact with, what you’re realistically making decisions about and what you’re responsible for. But this will then also affect the amount of the insurance policy. When arranging insurance, you will usually complete a detailed questionnaire to tell us what your job involves and what you use for work.

For example, people who use a company car at work will pay more for insurance. However, its insurance is not usually included in the basic offer, so you will have to choose a more expensive type of policy.

Liability for damage caused by an employee to a third party

According to the Civil Code, an employer who is liable for damage caused by its employee to a third party may subsequently recover such damage from the employee. In this case, the employer claims against the employee. If you have taken out employer’s liability insurance, this policy will also cover situations where the damage is caused by negligence. However, it is important to pay attention to the exclusions in the policy. The employer’s liability for damage caused by the employee to a third party arises directly from the law and the employer can subsequently claim compensation from the employee within the limits set by the Labour Code.

Employers’ liability insurance is designed to cover situations where an employee causes damage through negligence and the employer makes a financial claim against the employee.

Strict liability also plays a specific role. This refers to situations where the employer is liable regardless of the fault of the employee, for example in the case of damage caused by a particularly dangerous operation. Although the employee may feel liable in practice, the Labour Code allows recourse against him to be limited to statutory limits.

When is an employee liable for damages?

It is good to remember that you are not liable to your employer for any damage, but certain conditions must be met. These are:

• the occurrence of the damage,
• the damage arises in the course of or in direct connection with the performance of the job,
• there is a causal link between the breach of work duties and the damage.

It is at this stage that it is usually decisive whether the employer can actually claim damages and in what amount. In practice, it is often not only the damage itself that is at issue, but also whether the breach of duty, causal link and fault have been properly established. If you are unsure, we can help you assess the employer’s claim, check the supporting documents and suggest a course of action against the employer or insurer.

If any of the prerequisites are missing, you will not be liable for compensation.

The amount of compensation for damages caused by an employee is always assessed on an individual basis, based on the value of the damage and the legal limits for negligent conduct.

Employees are protected under the Labour Code in that they are liable to pay a maximum of four and a half times their average monthly earnings to their employer for damages caused by negligence. In practice, this means that if your average monthly earnings were CZK 36,000, your employer could claim damages up to a maximum of CZK 162,000.

As we have already mentioned above, the condition for the application of the statutory limit is that the damage is caused by negligence, i.e. by omission of work duties. This can occur, for example, if you do not park your company car overnight in the company garage as you are instructed to do, but leave it parked outside.

Of course, the situation is completely different when there is intent on the part of the employee. In such a case, he or she is liable to pay the employer for actual damages, in the amount actually incurred by the employer. The same consequence arises if the damage was caused while drunk or under the influence of addictive substances.

However, only the first case, i.e. damage caused negligently, can be insured. Of course, no insurance company will insure you for intentional acts.

If your employer has a claim for compensation against you, it may only set it off against the employee’s claim for wages, salary, remuneration under the agreement and compensation for wages or salary, and only make deductions from wages on the basis of the agreement on deductions from wages.

A completely separate area is the liability of an employee for damage to a company vehicle. For example, if a driver causes an accident through negligence, the employer can claim damages up to the statutory limit. However, if intent or drink-driving is proven, compensation is payable in full. Even in these cases, it can be useful to have appropriate professional indemnity insurance in place.

An example from our law practice

Mr. Konecny worked as a technician for a company that managed equipment for company facilities. During routine handling, he accidentally damaged more expensive measuring equipment and his employer began to claim damages of over CZK 230,000. In addition, the client was unsure whether he had already acknowledged the damage by signing an internal record of the incident.

We first checked whether all the prerequisites for the employee’s liability for damages were actually met and whether the employer had correctly determined the amount of the damages. At the same time, we addressed whether the client’s negligence was truly negligent or whether the condition of the equipment and inadequate working conditions contributed to the damage.

As a result, we were able to dispute a portion of the claim and close the case for a significantly lower amount than the employer originally sought. In practice, in cases like this, it often turns out that the employer automatically assumes the maximum liability possible without having everything legally correct.

Self-insured is not enough

Of course, we don’t just have to cause damage to our employer or a third party. What if we use our own computer or other personal equipment at work and destroy it by careless handling?

A normal liability policy won’t cover you for that either. Rather, you should try to prevent such situations and not use your own tools and equipment at work. If your employer forces you to do so, you can point out exactly such situations.

Entrepreneurs also have their own insurance policy

If you are an entrepreneur, or self-employed, then you should strongly consider taking out an insurance policy. With almost any trade, you can imagine damage being caused – a hairdresser can have her hair dye on a customer’s designer suit or handbag, a plumber can drop his sikes in the middle of a new bathtub. You don’t even have to consider your gainful activity explicitly as a business. If you walk dogs for a living in your spare time, you’ll appreciate an insurance policy in case an expensive breed of dog, such as a Tibetan Mastiff, irretrievably escapes.

So, if you cause damage to a customer’s property in any way, business liability insurance covers you against financial damages. The price of insurance is very individual, there are insurance companies that will insure almost any business and the price of the policy is based on the limit of the potential damage. But elsewhere, they look very closely at what you do and how you do it.

If you employ at least one employee as an entrepreneur, it is compulsory for you to have legal liability insurance. This then covers the costs incurred by the employee due to an occupational accident or illness.

Obligation to take out insurance

In some professions, it is a legal requirement to take out some form of public liability insurance, for example in professions with a high level of risk or liability for the property or health of others. However, regardless of the legal obligations, any employer may have a claim against you for employee liability, which they can claim against you, particularly if your policy fails to pay for the loss. Choosing the right insurance is therefore crucial to cover the amount of compensation you claim for damages caused by your employee.

This applies in particular to:

• medical professions such as GPs, vets, dentists etc.
• legal and economic professions – lawyer, notary, tax advisor, auditor
• other professions: aircraft operator, inland waterway vessel operator, operator of a nuclear installation, commissioner of a clinical trial of a medical device or medicine.

However, it always depends on whether you work as an employee, in which case your employer should be legally insured, or whether you are self-employed and the obligation applies directly to you.

Beware of exclusions

Be careful when signing an insurance contract and read everything properly. Especially what is written in smaller print at the end. You may find exclusions that make the policy not apply in full. Exclusions typically relate to intentional acts that caused the damage or drunkenness. However, you may also be unpleasantly surprised by exclusions related to misdirection during installation, repair, alteration and construction work, or related to the provision of bulk data processing and internet services.

Despite some partial disadvantages, professional indemnity insurance is a very useful product that can save you not only valuable money, but also the nerves, stress and time associated with dealing with compensation.

Summary

Employment practices liability insurance, popularly known as “crap insurance,” makes sense mainly as protection against common negligent mistakes made on the job. Typically, this includes damage to work equipment, a wrong decision, a mistake in operating equipment, or damage related to a company vehicle. But the legal substance is not just that the damage has occurred. It is always necessary to assess whether the damage occurred in the course of the employee’s duties, whether the employee breached a duty and whether there is a causal link between the employee’s conduct and the damage.

Importantly for employees, the law usually limits the scope of compensation for negligent damage to 4.5 times the average monthly earnings. However, this limit does not apply to intentional damage, drunkenness or abuse of other addictive substances. This is why it is not enough to just follow the insurance company’s advertising slogan. The specific terms of the contract, the exclusions and the amount of the policy limit are crucial.

In practice, the problem is that the employee often does not know whether to accept the damage without further delay, how to communicate with the employer or what to prove to the insurance company. However, a well set procedure can significantly reduce the risk of paying more than you actually have to. If your employer demands compensation or the insurance company refuses to pay, it pays to have the situation legally assessed early.