What Is Employee Benefits Liability Insurance—and How Is It Different From Other Liability Policies?
Offering employee benefits can help your business attract and retain quality employees. However, even a small administrative mistake involving those benefits could lead to a costly claim.
Employee Benefits Liability Insurance, commonly called EBL insurance, is designed to protect a business against certain errors or omissions made while administering its employee benefits program.
What Does Employee Benefits Liability Insurance Cover?
EBL insurance may respond when an employee suffers a financial loss because the employer made an administrative mistake involving benefits such as:
Health, dental, or vision insurance
Life or disability insurance
Retirement plans
Paid leave programs
Other employer-sponsored benefits
For example, an employee completes the paperwork to add a spouse to the company health plan, but the enrollment is never processed. If the spouse later requires medical care and the claim is denied, the employee could hold the employer responsible for the resulting expenses.
Other potential mistakes may include:
Failing to enroll an eligible employee
Accidentally terminating an employee’s coverage
Providing incorrect information about available benefits
Losing or mishandling enrollment documents
Failing to notify an employee about an important benefit or eligibility requirement
Employee Benefits Liability coverage generally focuses on errors, omissions, or negligent acts involving the administration of an employee benefits program—not the cost of providing the benefits themselves. IRMI defines employee benefits liability similarly, though the exact protection depends on the policy.
How Is EBL Different From Employment Practices Liability Insurance?
Employee Benefits Liability Insurance is often confused with Employment Practices Liability Insurance, or EPLI, but the two address different workplace risks.
EBL insurance focuses on administrative mistakes involving employee benefits. EPLI is designed for employment-related allegations such as discrimination, harassment, wrongful termination, retaliation, or certain other improper workplace practices.
For example:
An employee’s health insurance enrollment is mishandled: potentially an EBL claim
An employee alleges termination because of their age: potentially an EPLI claim
A business with employees may need both forms of coverage because one is not a substitute for the other.
How Is It Different From General Liability Insurance?
Commercial General Liability Insurance primarily addresses third-party claims involving bodily injury, property damage, and certain personal or advertising injuries.
It generally is not designed to cover an employee’s financial loss caused by a benefits-administration mistake. Adding Employee Benefits Liability coverage may help address this potential gap.
What About Workers’ Compensation?
Workers’ Compensation Insurance provides benefits when an employee experiences a work-related injury or occupational illness. Employee Benefits Liability Insurance deals with errors made while administering benefits.
These policies serve very different purposes. An employee injured on a jobsite may have a workers’ compensation claim, while an employee mistakenly left off the company health plan may have an EBL-related claim.
Is EBL the Same as Fiduciary Liability Insurance?
No. EBL insurance generally addresses routine administrative errors, while Fiduciary Liability Insurance may respond to allegations involving the management or administration of employee benefit plans and breaches of fiduciary duty.
Depending on the benefits offered and the responsibilities your company assumes, one policy may not replace the other. Businesses should review these exposures carefully with an experienced insurance professional.
Why Should New Jersey Businesses Consider EBL Coverage?
Benefits administration may involve business owners, managers, human-resources employees, payroll providers, and outside vendors. Even when a business has good procedures in place, paperwork errors and communication breakdowns can happen.
The financial consequences may include legal expenses, settlements, or damages associated with a covered claim. EBL coverage can be especially important for growing businesses that are hiring employees, expanding their benefits packages, or managing more complicated enrollment requirements.
Review Your Business Insurance With BIS Improved Insurance Agency
Every liability policy has its own purpose, conditions, exclusions, and limits. At BIS Improved Insurance Agency, we help New Jersey business owners understand how their policies work together and identify areas where coverage gaps may exist.
If your company offers employee benefits, contact BIS Improved Insurance Agency to discuss whether Employee Benefits Liability Insurance should be included in your business insurance program.
Coverage availability and terms vary by insurance company and policy. This information is for general educational purposes and does not alter or replace the terms of any insurance policy.
