As an HR Professional you play a critical role in your employer’s business, and in doing this you are often tasked with some heavy responsibilities. Hiring, firing, disciplining, making benefit decisions, staying compliant with laws, and so much more. These are all duties that unfortunately can invite lawsuits.
As an HR Professional, you can be held personally liable in some situations. I won’t go into detail about what those situations are, because I’m not an attorney and because you probably know this better than me already. What I want to focus on today are 3 insurance coverages that you should consider having your company carry that can help protect you if you are named in a suit.
#1: Employee Benefit Liability
This provides coverage for errors you make administering employee benefit programs. This one is important for you HR folks, because it protects you if you mess up. I know you never mess up, but if you did, this is what you want. So what are we talking about here?
The classic example involves your company’s Group Health Insurance. Let’s say your company’s policy has a 30 day waiting period. You hire a new employee, they fill out the paperwork after 30 days and give it to you, but it gets lost in the shuffle and falls through the cracks. You never send it in. A couple weeks later the employee has a serious accident at home that requires a hospital stay and surgery, but finds out they have no coverage because of your error. That’s Employee Benefit Liability. It can also apply to Group Life plans, Dental, Vision, etc.
These situations do happen. We’ve had claims, and let me tell you when these situations happen because of your error it makes you sick to your stomach. This coverage can help repair the situation.
This coverage can typically just be endorsed to your General Liability policy for a nominal cost – usually a couple hundred dollars at most. There’s really no excuse not to include this coverage, and a professional broker would have it included for you.
#2: Employment Practices Liability
If you’re in the HR world, you’re probably familiar with this one. This is the coverage that protects the company if a suit arises from discrimination, harassment, wrongful termination and other issues that arise out of the employment process. Generally the policies also protect employees, so if you are named in a lawsuit as the HR person, the policy would defend you which is important.
At this point more of our clients than not carry this coverage. If I was an HR professional, I would want to see that my employer has this insurance so that I would be protected if something happened. The cost is dependent on your industry and number of employees. It’s very easy for us to provide you with a pricing indication.
On a side-note, most EPLI policies include a tool that gives you access to HR Professionals (usually attorneys) that you can ask questions of at no cost. Many times they also include a library of HR materials. This is all just value-added Risk Management material that can be very valuable to HR professionals and is really “icing on the cake” to having the coverage.
#3: Fiduciary Liability
This is the least used policy of the 3 that I’m discussing here. To be honest with you, not many of our clients carry this coverage. That’s not because it is unnecessary, it’s really because it’s less understood by agents, insurance carriers and you, the insureds. It’s also not as easy to write the insurance.
So what does it do?
The ERISA Act of 1974 creates the possibility that fiduciaries could be held personally liable for alleged errors or omissions or breach of duty with regard to benefit plans. This can involve pension or profit sharing plans and ESOPS among others. But it can also include 401K plans. Even if you hire a 3rd party to manage the plan, it could be alleged that you made a poor choice in what provider to use.
Fiduciary Liability claims include a broad range of allegations, such as:
- Denial or reduction in benefits
- Failure to adequately fund a plan
- Conflict of interest
- Improper advice or counsel
- Lack of investment diversity
- Imprudent choice of mutual fund or 3rd party provider
- And many more…
Claims can come from current or former employees, or from a government entity such as the Department of Labor. Coverage is usually relatively inexpensive and written on a separate policy than your standard General Liability coverage.
So….
- Employee Benefit Liability
- Employment Practices Liability
- Fiduciary Liability
3 coverages you should be aware of and should explore to properly protect yourself as an HR Professional. Email me, call me, or look me up on LinkedIn. I’d love to answer your questions and talk with you more about this topic.
Thank you!
Trent Hess, CIC, CRM Business Risk Manager