Employee Benefits Liability Coverage provides errors and omissions coverage for the administration of employee benefits programs of an insured. This coverage is usually endorsed to the General Liability Policy or can be a standalone policy but almost always is written on a, claims made form vs. an occurrence trigger of coverage form. Though the coverage is endorsed to the General Liability policy, it contains its own limits, insuring agreements and exclusions and the coverage is not triggered by bodily injury and property damages as with most General Liability coverage’s. The coverage trigger is a claim being made during the coverage period because of an administrative error in connection with an employee benefits program. What type of Employee Benefits activities can give rise to errors and omission events?
- Providing advice to employees about covered benefits programs
- Errors in recordkeeping in connection with a covered program
- Misinterpreting a covered program’s regulations for an employee
- Enrollment errors or cancellation of a participant in a covered program.
What Type of Employee Benefit Programs or Plans are typically covered for Employee Benefits Liability Coverage?
- Group life insurance
- Group accident or health insurance
- Profit sharing plans
- Pension plans
- Employee stock subscription plans
- Workers compensation benefits
- Unemployment insurance
- Disability benefits
- Social security benefits
Give me an example of a claim that would be covered under Employee Benefits Liability Coverage.
Sally is the HR Administrator. Jane is a new employee. Sally gives Jane enrollment forms for the Health and 401k Plans and instructs her to return the forms within 30 days. Jane completes them in 3 days and returns them. Sally inadvertently places the forms in a stack of paper that is shredded at the end of the month and never enrolls Jane in both plans. Jane falls at home 5 months after starting work, turns in a health claim, only to be denied benefits. Employee Benefits Liability will pay the health insurance claim files by Jane because of the enrollment error.
The coverage for $1,000,000 is very inexpensive. Typically, the cost is only a couple of hundred dollars annually. Benefit plans to keep track of errors are more and more common, even with the prolific use of online enrollment in our society today.
The catch mentioned in the title of this article is this: Be careful moving coverage from carrier to carrier. Employee Benefits Liability (EBL) is written on a claims made form which has a retroactive date. This date is typically the first original date that EBL coverage was purchased. If you move coverage to a new carrier, make sure the original retroactive date is moved forward to the new policy. Otherwise, you could lose coverage for past errors that come to light in the future.
Make sure you have this coverage in place on your policy. You can typically find this inside or closely attached to your General Liability policy. If you are unsure if you have this coverage, visit AssuredPartners NL Property & Casualty and we can help you with a coverage analysis to make sure there are no gaps in coverage on your current program.