Commercial Insurance May Provide Employee Benefits Liability

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If your business has a Commercial General Liability insurance (CGL) policy, you may have coverage and protection if you make an error or omission while administering your employee benefits plan.

Being a Plan Administrator for your Employee Benefits Plan is a big responsibility – it’s more than just simple administration. If it’s not done correctly, you could be liable.

Plan Administration – An Important Job

As an example, if the Plan Administrator misses enrollment deadlines to add new employees, spouses and dependants on the plan, your company could be at risk. See our earlier post about the Risk of Late Applicants.

Another potential risk is in the event your employee waives health and dental coverage (as they have coverage with their spouse’s employer) and then do not complete the benefits enrollment form indicating they waived these benefits.

Many employees and employers don’t realize that the employee still needs to complete the enrolment form (and waive health and/or dental) to receive the other available benefits like Group Life, AD&D and Long Term Disability if provided by their company benefits plan.

In the event the employer and insurance carrier has no record of enrollment or waiver of certain benefits coverage and then the employee dies thinking they had Group Life Insurance, the employee’s family could sue and likely win with the employer being held liable for the expense.

Unfortunately, these situations do happen putting your organization at risk.

Review your Commercial Insurance Policy

Ideally, every Plan Administrator is well versed in their responsibilities; but in the event of an administration error or omission, you may already have some protection.

To be sure, review your Commercial General Liability Insurance to confirm you have the applicable coverage for Employee Benefits Liability. If it’s not included, then it’s a good idea to ask your insurance agent why not – it’s often included in CGL policies. Your CGL will also indicate how much you are covered for.

If you have further questions, please contact ENCOMPASS.

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