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What is employee benefits liability?

Employee benefits liability might be one of the most important coverages your law firm didn’t realize it needs to have. Like many employers, your firm may offer employee benefits like health insurance or vision care. Such benefits can help your company compete for qualified workers. Unfortunately, they can also lead to lawsuits against your firm or your benefits employees if they are not administered properly.

Not Covered by Standard Liability Policies

Small clerical errors can have major consequences. For example, suppose your company hires a new employee, and he completes the paperwork to enroll in the company-sponsored health plan. Due to a clerical error by a human resources employee, the employee is not enrolled. Several months later, this employee is hospitalized with a serious illness and discovers that he has no health insurance. When his medical bills begin to pile up, he seeks restitution by suing the HR worker and your firm.

Claims like this are not covered under commercial general liability policies because an administrative error is not an “occurrence” as that term is usually defined. Moreover, such errors typically result in financial losses rather than bodily injury or property damage.

To insure itself against claims resulting from administrative errors, your firm can purchase employee benefits liability (EBL) coverage. EBL coverage is often provided via an endorsement attached to a general liability policy.

Usually Claims-made

Employee benefits liability endorsements typically cover damages the insured becomes legally obligated to pay because of an act, error, or omission committed to administering employee benefits. EBL coverage usually applies on a claims-made basis, but some insurers do offer occurrence coverage.

If you would like to find out more about obtaining this coverage, please contact our office. One of our team members will be more than happy to answer all of your questions.