Employee Benefits Liability (EBL) coverage is one of three types of insurance an employer needs when administering benefits programs and handling employees’ funds under the Employment Retirement Income Security Act (ERISA).
The first insurance responsibility is dishonesty coverage to protect a company from the theft of funds by a program administrator. Such coverage is mandated by federal law.
The second insurance responsibility is fiduciary liability for the management of an employee benefit, pension plan, and plan asset management. A common exposure is advising an employee which stock to buy. The fiduciary or benefit manager is charged by ERISA with acting solely in the interest of participants and beneficiaries, minimizing costs and risks of large investments, and avoiding any prohibited transactions. Some insureds transfer their responsibility to a bank or other financial institution which may then assume the mantle of fiduciary. Since your employed benefit manager usually works with the CEO and CFO, ERISA makes them all personally liable for their decisions.
The third insurance need is employee benefits liability, which we offer as an endorsement to the commercial general liability policy. It covers legal liability the insured incurs in administering the company employee benefits programs. One of the primary reasons to purchase this coverage is to pay also for defense costs associated with a covered loss.
The coverage form states covered employee health benefits programs are:
- Group life, health, dental, or disability insurance
- Profit sharing plans
- Savings plans
- Pension plans
- Stock subscription plans
- Unemployment insurance, Social Security benefits, or workers' compensation and disability benefits
- Auto, homeowners, and legal advice insurance
- Travel and vacation plans
- Educational tuition reimbursement plans
Two of the more noteworthy exclusions are:
- Bodily injury, property damage, personal injury, or advertising injury
- Any act of you or your staff which is an ERISA fiduciary responsibility
Typical claims under EBL coverage would be:
- Failure to sign up a new employee for requested medical insurance
- An error of terminating a benefit for an active employee
- Forgetting to offer optional maternity benefits
- Forgetting to offer dependents’ coverage
- Forgetting to offer a spouse’s option for a retirement plan
The limits of insurance available may be the same or less than those of your commercial general liability insurance and the cost is reasonable.
This summary is intended for informational purposes only and does not replace or modify the definitions or information contained in any insurance policy or declaration page, which controls all coverage determinations. Terms and conditions may vary by state, and exclusions may apply.