Employee Benefits Liability Insurance

In order to compete for and retain qualified workers, companies offer an abundance of employee benefits, such as life insurance, dental and medical plans, pensions and maternity leave. While such benefits are appealing to employees, they also trail along lawsuits that result from poor and erroneous administration.

Let’s take the following example: A new employee signs papers that contracts him into your company’s medical plan. However, due to a computer error in administration, he is mistakenly not enrolled in the plan. A month later, he discovers he has stage 2 colon cancer and needs to take medication. His doctor tells him he seems to have no medical insurance and as a result, sues your company to cover the medical costs.

The previous example illustrates how small administration errors can lead to expensive consequences. Fortunately, with employee benefits liability insurance (EBL), such errors can be can be insured. EBL provides your company with liability coverage for errors, omission and acts in administering employee benefits. The coverage includes:

  • Failing to maintain an employee’s records or files pertaining to their benefits program.
  • Failure enrol, terminate or cancel a benefits program
  • False advice in benefits and eligibility in the benefits program

Like many policies, there are certain exclusions. EBL does not cover claims resulting from fraud, breach of contract, insufficient funds and employment-related practices (discrimination, sexual harassment, etc). Other exclusions, not listed here, may also apply.

When purchasing EBL, it is offered generally as an endorsement to the commercial general liability policy. It is usually a claims-made coverage, which means that there may be a retroactive date to indicate the earliest date which the error or damage may occur and still be covered. Some insurance companies do offer the policy on an occurrence-base.

Now, the main question is whether or not your company needs EBL coverage. It is not an essential policy for all businesses. Companies that have a large number of workers and that offer many benefits will benefit more with this coverage. If you are unsure if your business needs EBL, contact a broker from Pacific Insurance Broker Inc. to receive professional advice.