Employee Benefits Liability Insurance (EBL)
Employee Benefits Liability Insurance can be a stand-alone policy but is usually an added layer of protection that is provided on other policies. This policy typically protects the organization and its administrative staff from errors and omissions that can arise from employee benefit plans.
Depending on the size of the company, these employee benefit plans can involve group medical insurance, group life insurance, group disability insurance, group dental insurance, and group vision insurance. Usually most of the claims come from clerical errors from not adding or deleting the employee coverages as required or requested by the employee.
Typically administration acts can also be more specifically defined as the advice and or interpretation of coverages. Administration errors can also arise in determining the amounts of contributions on behalf of the employee and or the employer. This could sometimes extend to the employer’s accountants, actuaries, record-keepers and trustees.
Some of the common errors can be:
- Failing to enroll a new employee in the group medical plan in a timely manner might leave the new employee with no health insurance because the enrollment period has passed for the automatic enrollment. That would mean that the employee would have to pass the underwriting questions in order to be added to the company’s group medical plan. The employee has medical issues they might be without coverage or have coverage severely restricted.
- Similar type errors can happen when an employee leaves or is terminated. Failing to provide the proper cobra coverage that is a mandated federal law in by each state can also result in no coverage or lack of coverage for the employee that is separated from the organization.
- Failure to inform the employee of their options and coverages that are available thru their employer sponsored plans.
Small clerical errors can have major consequences. For example, suppose your company owns several apartment buildings. Bob, a new maintenance employee, completes paperwork to enroll in the company-sponsored health plan. Due to a clerical error by a human resources employee Bob is not enrolled. Several months later Bob is hospitalized with a serious illness and he discovers he has no health insurance. When his medical bills begin to pile up Bob seeks restitution by suing the HR worker and your firm. Claims like Bob’s are not covered under commercial general liability policies because an administrative error is not an “occurrence” as that term is usually defined. To insure itself against such claims your firm can purchase employee benefits liability (EBL) coverage. EBL coverage is often provided via an endorsement attached to a general liability policy.
Most commonly the employee benefits liability insurance is added to the commercial general liability policy or is included in the group medical insurance policy. While an organization can purchase a stand-alone employee benefits liability insurance policy it is usually less expensive to endorse this coverage onto other plans. This policy, like other insurance policies, does not cover criminal acts or dishonest acts by the corporation or its employees. As far as insurance policies go, the employee benefits liability insurance policy is very inexpensive and should always be a part of your insurance portfolio risk management strategy.
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