Are you covered for errors administering a benefit program?
Imagine the following scenario...
Your company is growing, and you realize that it is time to upgrade your current employee talent and take on some extra help. You have finished up final interviews for a new administrative position and decided to hire a very promising recent graduate. You give your new hire a tour of the office, proudly welcome her to the team, and introduce her to your Human Resources manager, who is just returning from a quick vacation. You get back to your busy day of taking phone calls from upset customers who are eager to work with you, but complain that your company is lacking customer service. As you explain to these customers that you just hired more support, your Human Resources manager rushes your new hire through the basics of working in the office, sets her up with a desk and office key, and then rushes back to catching up on work missed on his vacation. Caught in all the rush, the new hire was never given an employee handbook, or any info on how to be added to the benefits plan, since your HR manager tells himself that he will follow up with this the following day once the new employee has settled in. Sure enough, the next day is even more hectic and all your employees are struggling to train your new hire on office procedures.
Two weeks go by, and suddenly you receive a phone call from your employee’s husband explaining that she has been involved in a major vehicle accident and has several breaks and fractures. She won’t be able to return to work for a couple of months and will need extensive physical therapy. Neither she nor her husband can find any information regarding her health insurance plan. You immediately contact your HR manager and find out she was never added to the plan. Your HR manager explains this mishap to the husband, who tells him irately that he will have his attorney contact you. Your firm is about to be sued for hundreds of thousands of dollars, and your insurance provides no coverage for Employee Benefits Liability.
What exactly is the purpose of Employee Benefits Liability coverage?
The short answer:
Employee Benefits Liability provides coverage for an employer for errors when administering an employee benefit program.
Employers have the responsibility to disclose information about available employee benefits programs, and failure to advise employees of programs can lead to severe penalties. Does your firm provide health, life, disability, or retirement benefits? These are among the most common group benefits offered by companies with valuable employees. In some states, companies with a certain amount of employees are required to offer healthcare coverage, and in light of recent federal legislation and the national healthcare crisis, employer-sponsored healthcare is becoming a much more sensitive subject to both employees and employers.
As an employer, you offer your employees these programs to express your appreciation for their hard work and trusted service, and to maintain the qualified workforce you worked so hard to assemble. Your employees are perhaps your company’s most valuable asset, and the loss of one key employee could cause a major disruption. A simple oversight by you or your human resources manager could trigger retribution from a misguided current employee or former employee against your company, costing millions of dollars in attorney’s fees and settlements, not to mention the equally damaging loss of reputation, public embarrassment, and reduction in employee morale. Employment laws change constantly, and while you work diligently to keep every member of your workforce on the same page, simple oversights are easy to make, especially when hiring or terminating an employee.
How can I save from an Employee Benefits Liability policy?
This coverage is not very expensive and can typically be added to your General Liability policy for a small additional premium. If your insurance agent has not discussed this key component of your company’s insurance coverage with you, your business may be exposed to a very large lawsuit from a mistake made just recently.
In many cases, these suits arise from the termination of an employee, when your obligation to provide COBRA coverage is overlooked because you are too busy struggling to find a replacement employee. Whatever the case may be, your role as an employer is ripe with complex procedures, and you are held to a high legal standard to carry out each procedure with meticulous care. It is important that a prudent insurance adviser takes the time to understand your business and help you understand your exposures, and we will advise you and provide solutions for protecting you and your business. Employee Benefits Liability is an integral insurance solution for any business with employees who are offered benefits.
