Human Resources Professionals Should Consider Employee Benefits Liability Insurance

Posted in: Employee Benefits

While insurance coverage is typically handled by the risk management department of your organization, as a human resources professional, there is liability coverage that is important for you to be aware of – employee benefits liability insurance.

Employee benefits liability insurance is a claims made professional liability coverage that protects you, the insured, from damages as a result of a negligent act, error or omission committed in the administration of your employee benefits program such as continuing or terminating an employee’s participation.

An example of a potential claim would be if you forgot to enroll a new employee in their life and health plan, and this employee got in an accident. The employee then has no coverage for their hospital and medical bills. This would be considered a clerical error because it was missed during the enrollment period and the insurance carrier would most likely deny the claim. Without an employee benefits liability insurance policy, the employee would have to pay all of their medical bills out of pocket and could decide to sue your organization for neglecting to enroll him or her in the plan.

It’s important to note that the insurance carrier’s position on how they handle these types of claims has changed over the years. Twenty years ago, if an issue similar to the one described above occurred, the carrier would allow you to retroactively pay back your premiums so that the individual would be covered. This is no longer the case.

While it is not typical for you as an HR professional to look into commercial insurance coverage, it is worthwhile for you to reach out to your risk management department and make sure that employee benefits liability Insurance is included as part of your organization’s comprehensive insurance plan.

If you or anyone from your risk management department has any questions about employee benefits liability insurance, please contact me at lee@psafinancial.com.

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