Employees rely on the benefits you provide them—health insurance, for example. They need to know that the coverage will be there for them when they need it. They also need to be confident it will provide the degree of protection you and your insurance company have described. That means there’s tremendous pressure on your company to administer and manage your benefits correctly. This is when having a policy like employee benefits liability can work for you.
Fail to submit a form that activates an employee’s coverage, for example, and there can be serious consequences. If they attempt to report a claim and discover the insurance company won’t cover it, they may sue you for costs caused by your mistake.
Anyone who’s managed benefits understands that it’s no simple task. Whether you have one employee or dozens, it’s easy to miss a deadline, fill out a form incorrectly, etc., when you’re also dealing with countless other business challenges vying for your attention.
That’s why we offer employee benefits liability insurance (also known as EBL insurance) as an add-on to a general liability or business owners policy. Employee benefits liability coverage is vital for any company that provides benefits.
So, what is employee benefits liability coverage and how can it help provide assurance to a business?
If your business offers benefits to employees, you’re required to do so in a way that doesn’t cause them financial harm. That means you have to take the appropriate actions to get them the coverage they signed up for, that their claim costs are covered as described in the policy terms, etc.
If you fail in our obligations and your mistake causes an employee to suffer financial damages, a court may find you liable for those costs. So, having a policy like employee benefits liability coverage can help protect your business.
This type of policy can address mistakes your business makes. You may hear insurers and others refer to employee benefit liability coverage as a type of errors and omissions insurance—errors being things you do incorrectly and omissions being actions you fail to take.
How might an employee benefits liability insurance claim arise? Imagine that you’ve just hired a new employee. As a standard part of your onboarding process, you sign employees up to participate in your company health insurance plan if they elect to receive that coverage. In this instance, they want the insurance. You fill out the required forms but fail to submit them—meaning they don’t have coverage.
Later, the employee is involved in an accident while riding their bike and breaks their arm. When they arrive at the hospital for treatment, the receptionist tells them that the health insurance company says it has no record of them being a plan participant.
The employee has no choice but to pay for their treatment themself. The cost of X-rays, setting the broken bone, pain medication, etc., is well over $10,000. The employee subsequently sues your company for the total, and the court finds you liable. Your mistake meant that the employee who thought they were covered did not, in fact, have health insurance. That's why employee benefits liability is essential.
The employee benefits liability coverage claim example above is just one scenario where this type of coverage can protect your business. Employee benefits insurance (sometimes referred to as EBL insurance) can also cover other benefits your company might offer, like: