Which statement about employers liability coverage is true?

Employers liability coverage is designed to protect businesses against claims from employees who suffer work-related injuries or illnesses that are not covered by workers' compensation. The correct statement is that this coverage does not extend to punitive damages arising from the injury or death of individuals who are illegally employed. This means that if an employee is working illegally—say, without proper documentation or below the legally required age—the employer cannot rely on employers liability coverage to defend against or settle claims resulting from that person's injuries or death.

This limitation is important as it underscores the legal and ethical responsibilities employers have in hiring and maintaining a lawful workforce. When an employee is illegally employed, it raises questions about the legality of the employer's actions, which often results in denying coverage for associated claims.

Understanding this nuance helps clarify what employers liability coverage does and does not protect against, ensuring that both employers and employees are appropriately informed about their rights and responsibilities.