Employee benefits liability (EBL) insurance should be an integral part of your risk management strategy. EBL provides coverage to an employer for errors or omissions in the employer’s administration of its employee benefits program. For example, if a new employee requests to receive medical insurance through the employer and the employer failed to add the new employee to the plan, the h
ealth insurance company will later deny coverage for the employee’s medical claim. In this situation, the EBL coverage would pay for the benefits that would have been payable under the health insurance plan but for the employer’s error.
These clerical errors are common reasons for a claim:
The employee is not added to their benefit plans
The employee is added to the wrong benefits plan
The employee is accidentally deleted from coverage altogether
EBL can also include coverage for inaccurate information given by employers to employees about their specific benefits. Mistakes in calculating the amounts of contributions of the employer or employee are also covered by employee benefits liability coverage. These kinds of errors are usually made by a benefits administrator in the HR Department and can include your HR manager, record keepers, accountants, and trustees.
Additionally, EBL coverage also protects employers from certain Affordable Care Act (ACA) and workers’ compensation claims.
For example, this type of situation might involve a freelancer working at your firm who files
a lawsuit, claiming they were wrongfully classified as an independent contractor and arguing that your company should consider them a full-time employee. Under the provisions of the ACA, this would, in effect, make them eligible for health insurance and several other employee benefit plan programs. However, EBL coverage would protect your business from a suit in such a scenario, assuming, of course, the misclassification was erroneous.
Is Employee Benefits Liability Coverage Included in a General Liability Policy?
Employee benefits liability coverage can either be a stand-alone policy or added as an endorsement on another policy such as commercial general liability insurance. A commercial general liability insurance policy covers third-party bodily injury, property damage, and advertising injury.
It’s important to note that EBL is often confused with fiduciary liability insurance. Fiduciaries are legally and ethically responsible for a client’s assets. Fiduciary liability is insurance coverage that protects a business from administrative errors and omissions when fiduciary duties are breached and it results in a financial loss.
Which Policies Do Employee Benefits Liability Cover?
Your employee benefits liability policy covers most employee benefits including the following:
Health insurance plan
A comprehensive benefits package may include the above as well as other benefits not listed here. If your employee benefits plans include something else, be sure to speak with an insurance broker to determine appropriate coverage.
Limits of an Employee Benefits Liability Policy
Employee benefits liability policies have two different types of limits:
Each Employee Limit: This amount is the most an insurer will pay per each employee and/or their spouses and family.
Aggregate Limit: This is the highest amount the insurer will pay out per policy for an individual business.
A business will have to pay a deductible per each occurrence.
Exclusions from Employee Benefits Liability
There are certain claims that are not covered by this type of insurance policy:
Claims of the poor performance of an employee’s 401(k)
An employee is not happy with their salary or wage
Bodily injury and property damage claims
Any benefit provided by the company that is not of monetary value
Fraudulent or criminal acts by the administration
If a company has less than 50 employees, any health insurance benefit program that is offered is completely voluntary. If claims are made against a company with less than 50 employees regarding an issue including health insurance, there may only be partial coverage of the claim for the employee.
Why Do You Need EBL Coverage?
Liability insurance for employees is among the least expensive kinds of coverage, particularly if it is an endorsement. It should, however, be part of your risk management strategy. It’s also a way to ensure that valued employees aren’t left in a difficult situation if errors or omissions occur.
What Is the Cost of Employee Benefits Liability Insurance?
There are several variables to consider when calculating the cost of this type of insurance plan, including the size of the company and the number of employees. Insurance companies offer a variety of plan options with premiums that will vary based on the coverage levels, but policies are available with very affordable premium amounts. It’s best to speak with a knowledgeable agent to help determine if an EBL insurance plan is right for your business. An agent can also help you determine other types of business insurance you may need.