When your employees are healthy, your company is healthy too. This is one of the top reasons to offer employee benefits like medical, dental, vision, and long-term care. Benefits encourage good habits, attract top talent to your company, and help your team feel secure.
But what happens when something goes wrong with your benefits plan? Perhaps an employee wasn’t properly notified about it or received inaccurate information. To manage this risk, any company that offers benefits should also purchase employee benefits liability insurance. Here are some factors to keep in mind.
Factor #1: Mistakes Happen
Benefits plan administration is complex. These programs handle a huge amount of employee information, and even a small error can create big problems. Your employees are putting their trust in you to handle their health and financial situation with care.
Imagine, for example, that a new employee named Paula joins your company health plan. But due to a keystroke error, your benefits administrator, Mark, fails to properly enroll her in the program. A few weeks later, Paula is hospitalized after a serious accident. Paula’s husband is shocked when the hospital says her insurance isn’t valid and sues your company for the medical costs.
Only if you have benefits liability insurance will your company be protected from this situation. Otherwise, you’ll have to pay any settlement or judgment outright.
Factor #2: General Policies Aren’t Enough
If you have a general liability policy, that’s terrific -- but it’s not enough to cover the situation described above. General policies don’t deal with clerical errors and administrative mistakes.
Your general liability coverage handles things like property damage and accidents that happen on your premises. It’s not intended to cover problems resulting from benefit plans.
Factor #3: You’re Responsible for Misunderstandings
You can’t be there to supervise how your benefits plan is handled 100% of the time. Your benefits administrator oversees it. If they get confused and misstate an aspect of the plan, it’s your responsibility to deal with the fallout.
So if your HR manager tells someone their common law spouse is covered by the plan, but this is inaccurate because the two are not legally married, your company could be held liable. In fact, you could even be held responsible because your graphic designer made an unclear flyer that was posted around the building, confusing people about their benefits. These kinds of misunderstandings are, ultimately, the employer’s problem because they involve failure to properly notify employees of their benefits.
Factor #4: Loss of Data Isn’t an Excuse
If your benefits program administration is interrupted somehow, perhaps due to a power outage or computer server failure, it doesn’t relieve you of responsibility for the repercussions. You can be held responsible for lost paperwork, missing electronic files, or failure to provide proper documentation.
What if a major issue occurred simply because of a lost laptop? Perhaps your benefits manager stored employee benefits information on her laptop and then lost it. This could create delays or denials of benefits for your employees. You’re liable in the event of a lawsuit -- even if you had great laptop security in place.
As you can see, benefits administration is tricky. If your company provides this kind of program, consider partnering with a reputable employee benefits provider and seek employee benefits liability insurance. It’s the only way to manage the real-world risks that come with providing a company benefits plan.
Call us at 732-380-0900 or request a quote today.
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