Employee benefits liability coverage is just what it sounds like: It covers the company against errors or omissions which were made about an employee’s benefit plans.
This kind of coverage is usually an endorsement on another policy such as the commercial general liability policy, but it can be a stand-along policy .
Most claims revolve around clerical errors wherein the employee is not added, added to the wrong benefits, or deleted from coverages. Errors which happen in advice to an employee about a particular benefit or mistakes in calculating the amounts of contributions of the employer or employee are also covered by employee benefits liability coverage.
Such errors are usually in the Human Resources Department, though they can also come from record-keepers, accountants, and trustees.
Here are a few scenarios:
A new employee chooses her benefits in the group medical plan, but the paperwork gets lost at some point after she has finished it. No one notices that it became lost, and there is nothing to trigger an alarm that such a thing happened.
Once the initial enrollment period has passed, the employee is stuck with no health coverage until next open enrollment.
Of course, this in itself is actionable, but if the employee has a chronic illness or has an accident, this becomes crucial, and the company will have to come up with a way to settle the problem.
Employee benefits liability insurance is among the least expensive kinds of coverage, particularly if it is an endorsement. It should, however, be part of your portfolio risk management strategy. Be sure to bring this issue up with your licensed insurance professional.