In most of the country, a workers' compensation policy comes in two halves. Part One pays the injured worker the statutory benefits the law requires. Part Two — Employers Liability defends the business when someone sues over that injury in a way the statutory benefits don't cover. Everywhere you buy comp from a private carrier, both halves come together, and almost nobody thinks about the second one.
In four states, the second half isn't there.
North Dakota, Ohio, Washington, and Wyoming are the country's remaining monopolistic workers' comp states. In them you can't buy comp from a private insurer at all — you buy it directly from the state fund — and the state fund's policy provides Part One and stops. The employers liability half that every other policy includes is quietly missing. The coverage that plugs the hole is stop gap coverage, and it's one of the most overlooked gaps in commercial insurance, precisely because the business has a workers' comp policy and assumes it's complete.
Why these four states are different
Most states let private carriers write workers' comp, or run a competitive state fund alongside them. The four monopolistic states don't. If you have employees working in any of them, you must secure coverage from that state's fund:
- North Dakota — Workforce Safety & Insurance (WSI)
- Ohio — Ohio Bureau of Workers' Compensation (BWC)
- Washington — Department of Labor & Industries (L&I)
- Wyoming — Department of Workforce Services, Workers' Compensation Division
(Nevada and West Virginia were once on this list; both moved to private markets years ago — Nevada around 2000, West Virginia in 2008 — so they're no longer monopolistic. Texas is sometimes lumped in by mistake, but Texas is the opposite case: comp there is *optional*, not state-run.)
These funds do their job on the statutory side. What none of them sell is employers liability.
The half that's missing: Employers Liability
It's worth being precise about what the two parts do, because the gap lives in the difference.
Part One — Workers' Compensation is the no-fault bargain: the injured worker gets medical and wage benefits set by statute regardless of who was at fault, and in exchange comp is the worker's exclusive remedy against their own employer. The state funds provide this.
Part Two — Employers Liability is the litigation backstop. It responds to injury-related lawsuits that *aren't* the statutory claim — the ones that get around exclusive remedy or come from someone other than the employee. This is the part the state funds leave out, and it's the part that turns a workplace injury into a lawsuit the business has to defend out of pocket.
What Employers Liability actually defends
Stop gap matters because the claims it covers are real, common, and expensive:
- Action-over (third-party-over) claims. An employee is hurt, collects comp, and — barred from suing you directly — sues a general contractor or property owner instead. That party then pulls you back in through the indemnity clause in your contract. Exclusive remedy stopped the direct suit; the action-over gets around it. This is the single most important reason to carry employers liability, and we break the mechanism down in detail in contractual liability, action over & the C-105.2.
- Loss of consortium. A spouse sues for the loss of companionship and services caused by the worker's injury — their claim, not the employee's.
- Consequential bodily injury. A family member's own injury alleged to flow from the worker's injury.
- Dual-capacity claims. The employer is sued in a second role — for example as the manufacturer of the product that hurt its own employee.
In 46 states, Part Two of the comp policy handles all of these automatically. In the four monopolistic states, nothing does — unless you've added stop gap.
Stop gap coverage: closing the gap
Stop gap coverage (often written as "stop gap employers liability") is simply employers liability coverage added by endorsement to fill what the state fund omits. The name is literal: it stops the gap the monopolistic fund leaves.
Where it's attached depends on your footprint:
- If you operate in both monopolistic and non-monopolistic states, stop gap is usually endorsed onto your standard workers' comp policy — the "other states" policy that covers your private-market employees — extending employers liability into the monopolistic states.
- If you operate only in a monopolistic state, there's no private comp policy to attach it to, so stop gap is endorsed onto your general liability (CGL) policy instead.
Either way, you end up with the employers liability limits — commonly matching standard Part Two limits — that the state fund never provided. For the GL side of that arrangement, see our general liability insurance overview; for the comp side, workers' compensation insurance.
State-by-state: what to line up
The pattern is the same in all four, with the fund name being the main difference:
North Dakota. Secure Part One coverage from WSI; add stop gap employers liability for your North Dakota exposure. North Dakota is a tightly run single fund, and out-of-state employers sending workers in are expected to register.
Ohio. Secure Part One from the Ohio BWC (Ohio has well-known group-rating and self-insurance programs on the benefits side); add stop gap employers liability — Ohio is where action-over and third-party-over claims make the missing Part Two most dangerous for contractors and manufacturers.
Washington. Secure Part One from L&I (Washington rates coverage by risk classification and reports hours worked); add stop gap employers liability. Washington's active construction and maritime-adjacent economy makes the employers-liability gap a live exposure.
Wyoming. Secure Part One from the Department of Workforce Services; add stop gap employers liability. Wyoming's energy, construction, and extraction work drives exactly the kind of serious injuries that generate employers-liability suits.
In every case the structure is two moves: register with the fund for the statutory benefits, and add stop gap for the employers liability the fund doesn't sell.
Where businesses get caught
The failures are predictable:
- A company headquartered elsewhere sends crews or employees into Ohio or Washington, dutifully opens a state-fund account for Part One, and assumes its national workers' comp or GL already handles the rest. It doesn't — the employers liability for those states has to be specifically added.
- A contractor operating only in a monopolistic state carries the state-fund comp and a GL policy, never realizing the GL needs a stop gap endorsement, and has no employers liability at all when an action-over claim arrives.
- Certificates look fine but aren't. A certificate of insurance can show state-fund comp and still be silent on stop gap, so a general contractor checking a sub's paperwork can miss that the employers liability — the coverage that actually backs the indemnity in the subcontract — isn't there.
- The gap surfaces only at claim time, which is the worst time to discover a coverage you never bought.
How to line it up
1. Map where your employees actually work. Any time spent in ND, OH, WA, or WY triggers both a state-fund obligation and a stop gap need. 2. Register with each monopolistic fund for Part One statutory benefits in the states where you have employees. 3. Add stop gap employers liability for those states — on your workers' comp policy if you also operate elsewhere, or on your general liability policy if you operate only in a monopolistic state. 4. Match the limits to your standard employers liability and to anything your contracts require. 5. Check your certificates so stop gap is actually reflected — especially if a general contractor or client is relying on your employers liability behind an indemnity agreement.
For the broader workers' comp picture, see do you need workers' compensation insurance.
Our approach
At Cory Washington & Co., we insure businesses across all 50 states, which means we deal with the monopolistic four constantly. We map where your employees actually work, make sure Part One is handled through the right state fund, and add stop gap employers liability — on the comp policy or the GL policy, whichever fits your footprint — so the litigation half of workers' comp isn't missing in the states that leave it out. The goal is that an action-over or consortium claim in Ohio or Washington meets the same coverage it would anywhere else.
Operating in North Dakota, Ohio, Washington, or Wyoming — or sending crews there? Request a quote or a coverage review and we'll make sure the stop gap is actually in place.
Frequently Asked
Which states require stop gap coverage?
The four monopolistic workers' comp states: North Dakota, Ohio, Washington, and Wyoming. In these states, workers' comp must be bought from the state fund, and the state fund's policy provides statutory benefits but no employers liability coverage. Stop gap coverage adds that missing employers liability protection. (Nevada and West Virginia used to be monopolistic but privatized years ago, so they no longer need it.)
Is stop gap coverage added to the workers' comp policy or the general liability policy?
It depends on where else you operate. If you have employees in both monopolistic and non-monopolistic states, stop gap is usually endorsed onto your standard (other-states) workers' comp policy. If you operate only in a monopolistic state — where there's no private comp policy to attach it to — it's endorsed onto your general liability policy instead. Either way, the point is the same: add the employers liability the state fund leaves out.
What does stop gap coverage actually pay for?
Employers liability claims — the suits that fall outside the statutory benefits the state fund pays. That includes action-over (third-party-over) claims, where a general contractor or other party pulls you into a lawsuit over your own employee's injury; loss-of-consortium claims by a spouse or family member; consequential bodily injury to a family member; and dual-capacity claims. Without stop gap, these come straight out of the business.
This article is general information for business owners, not insurance or legal advice, and does not bind or alter coverage. Policy terms, eligibility, and pricing vary by carrier and state — confirm specifics with our licensed team before making decisions.