In SW Florida, when potential employees are searching for a job, two of the most important factors in their job search are salary and employee benefits. Employer-provided benefits can help companies stay competitive in attracting the top employees and retaining current ones. However, someone has to be responsible for managing and administrating employee benefits, such as medical, dental or vision insurance. What happens when an employee makes a mistake in the administration of employee benefits? Is the employer liable?
Employee Benefits Liability
Businesses that offer employee benefits are likely to be considered liable for not administrating those benefits properly. An employer or one of their employees could find themselves liable for errors in the administration of employee benefit programs, such as:
- Failure to provide information about the available employee benefits programs that the company offers for the employee and any eligible dependents.
- Failure to enroll an employee or their qualified dependents in benefits within a timely manner. Therefore, an employee may not know that they or their dependents do not have insurance coverage until they try to use it or an emergency occurs.
- Failure to counsel employees about maintaining insurance coverage for themselves and any dependents under COBRA in the event of termination of employment.
- Negligence in interpreting employee benefits, recordkeeping and other administrative errors or omissions, such as improperly changing or canceling employee benefits.
Employee Benefits Liability Insurance (EBL) protects an employer in the event that a liability claim is filed by a current or former employee, due to errors and omissions in administration of employee benefits programs. EBL coverage may be included with a General Liability Insurance policy as an endorsement or as part of the employer’s group health insurance policy. It can also be purchased a stand-alone policy.
Claims made coverage
Usually, Employee Benefits Liability Insurance covers damages on a claims-made basis when the business is held liable for administrative errors regarding employee benefits programs. It may be possible to obtain coverage on an occurrence basis.
Obtaining Employee Benefits Liability Insurance is affordable for businesses that provide benefits to their employees. EBL coverage does not cover criminal or dishonest acts by an employee who administrators employee benefits or the business itself. It does provide a much-needed additional layer of protection against liability claims a company would otherwise be held responsible for.