What Is Employee Benefit Liability Insurance?

What Is Employee Benefit Liability Insurance

What Is Employee Benefit Liability Insurance? Employee benefits Liability insurance provides coverage to an employer for errors or omissions in the employer’s administration of its employee benefit program.

For example, if a new employee requests to receive medical insurance through the employer and the employer failed to add the new employee to the plan. Then the health insurance company later denies coverage for the employee’s medical claim. The Employee Benefits Liability coverage would pay for the benefits that would have been payable under the health insurance plan but for the employer’s error.

This coverage applies to a wide range of employee benefits including health, life and disability insurance, retirement plans, and other benefits offered through plans administered by the employer.

What Is Employee Benefit Liability Insurance? Insurance Diaries Explains

Employers can be held liable for errors in the administration of their employee benefit programs, even for honest mistakes. For instance, if the insurance benefit coordinator mistakenly tells an employee that they have coverage for vision care, the employee can file a case against the employer.

If the employer’s liability insurance includes employee benefit liability coverage, the policy can pay for the mistake.

All employers have to have employee liability insurance so that if anyone employed in the business is injured or becomes ill because of the work they are doing, they will be able to be compensated.

All employers have to have employee liability insurance so that if anyone employed in the business is injured or becomes ill because of the work they are doing, they will be able to be compensated.

Many people use the word ‘protect’ when they talk about insurance, but of course having insurance doesn’t make anyone safer. All it does is make sure that there is financial backup should the worst happen. As an employer, you are still very much the person responsible for your employees’ health, safety and wellbeing whilst they work for you.

When you start any business, especially if you are a mum working from home, probably part time, the last thing on your mind is taking on staff but you would be surprised at the short time it often takes for a business to need more help.

If you employ close family members you are not compelled by law to take out employee liability insurance, but of course commonsense suggests that you will do so anyway, because your family deserve the best financial back up you can give them. It is simply a matter of it not being the law to provide it.

If you are in the business of contracting to perform a specific task, you will probably be employing temporary staff, but this is fine; your insurance policy will cover numbers of people, not specific individuals.

Insurance companies will be happy to help you when you first realize you need insurance, but for all legal issues in business, expert advice is a good idea. When you take out your policy, a good insurance company will give you information on what your responsibilities are as an employer, over and above taking out the insurance.

If you and your employees work with anything hazardous, there are COSHH guidelines to help you with how to deal with them and these should be copied to every employee. Protective clothing should also be made available to everyone and training should be given where appropriate.

This is important because if you don’t do this, you may find your policy is void. If you are a sole trader, this could mean that you may be personally sued and the consequences could be catastrophic.

As a business which began as just one person working from home part time, suddenly you might find yourself as a major employer. Before you take the step from working for yourself to having staff, you need to take a hard look and decide whether you want to keep your business small and simple or grow the business and take on more responsibilities.

In the end, if you are a woman entrepreneur with real vision, you will be happy to take on the legal side to see your business start up really flourish and perhaps help other mums to find work in the home or outside it. Flexible work arrangements need a bit of back up and so with a staff you can make sure that you can maintain your work life balance.

How Employee Benefits Liability Coverage Works

Suppose a new employee joins your company and the HR manager accidentally fails to enroll them into the company health plan. A few weeks go by, and the new staffer gets involved in a car accident only to find out they do not have health insurance. In such a scenario, having an EBL cover could reduce your business’ exposure from failing to enroll the employee in the company medical benefit plan.

Additionally, Employee Benefits Liability coverage also protects employers from certain Affordable Care Act (ACA) and worker’s compensation claims.

For instance, suppose you have a freelancer working at your firm. The individual in question then files a lawsuit against your company, claiming they were wrongfully classified as an independent contractor, arguing that your company should consider them a full-time employee. Under the provisions of ACA, this would, in effect, make them eligible for health insurance and several other employee benefit plan programs.

EBL coverage would protect your business from such a suit in such a scenario, assuming, of course, the misclassification was erroneous.

How to Protect Yourself Against Liability

Protection should start at the beginning of employment with an employment contract. By ensuring you have adequate protection under the contract, you could protect yourself against claims for personal liability.

You may even want it looked over by a contract lawyer to ensure you are properly covered. If you’re an employer, you should dedicate time to ensure your employees understand safety guidelines.

If you already have a personal liability claim against you, then you may be able to claim damages from your employer if you were performing a duty instructed by them. Such instances are covered under the Employees Liability Act 1991 (NSW).

It does not include breaches under the Trade Practices Act or the Fair Trading Act. Most of the protection in regards to employees comes under the responsibility of the employers. They should ensure that their practices do not contravene these relevant acts or any other rules and regulations. This includes getting public liability insurance to protect the company and employees from claims for damage of property and also personal injury to third parties.


Employees can be personally liable for conduct and their mistakes in the workplace, although this is rare. This can include joint and also personal liability, and can arise for a number of reasons. For an employee, the best form of protection is to understand your employment conditions and follow all rules and procedures.

If anything is unclear, it’s always better to ask your employer rather than operate under assumptions. If you’re an employer and want to make sure you’re protected in the event your employees make mistakes, it is recommended that you talk to an employment lawyer.

Leave a Reply

Your email address will not be published. Required fields are marked *