Business owners often lack the need to hire employees for a few months to even a few years. But when the time comes to increase head count and offer employee benefit options, you need to protect your business by obtaining Employee Benefits Liability (EBL) coverage. EBL insurance covers claims and protects employers from costly lawsuits as a result of an employer’s error in administering an employee benefit program.


Small Errors Could Cause Big Issues

When companies offer employee benefits, such as health insurance or dental care, it is a great way to attract new people and retain existing ones. If not managed properly, they can be the source of unwanted issues and major consequences. For example, if an employee signs up for health insurance and completes the necessary paperwork, however the human resources manager neglects to file it properly, the employee could be left without health insurance without any knowledge of the clerical error. If said employee is later injured and hospitalized, he will be shocked to discover he has no insurance. As the bills begin to pile up, the employee may sue for financial reimbursement.

General Liability Policies Don’t Cover Mismanagement

It is important not to mistake commercial general liability policies with an employee benefits liability policy. Firstly, an administrative error does not qualify as an “occurrence,” or accident causing continuous or repeated exposure to the same general harmful conditions. Secondly, the clerical error did not result in the bodily injury or property damage. Instead the error caused financial injury, which is not covered by general liability policies. The good news is that you can add on EBL coverage to your general liability policy for even broader coverage.

Better Safe Than Sorry

The types of errors covered by an EBL policy are invaluable because costly mistakes happen. It’s important to correctly explain benefit plans and eligibility details, as well as maintain benefit records for employees and other eligible family members and beneficiaries. When purchasing EBL, make sure it covers all of the benefit plans your company offers, such as medical insurance, pension plans, social security benefits, maternity leave, and more.


Several factors like employee headcount and benefits offered determine the need for EBL coverage, so talk to your qualified insurance agent at Sargeant Insurance Agency who will help you decide the best option for your business. Keep in mind, insurance coverage should never be used as a substitute for good risk management.