(July 2026)
This endorsement covers errors and omissions the named insured makes in administering its employee benefits programs. It does not cover improper or inadequate investment advice or the actual investment decisions made by the retirement plan or pension administrator. This endorsement should not be used in place of fiduciary liability coverage. Any business subject to the requirements of the Employee Retirement Income Security Act (ERISA) should have fiduciary liability coverage.
Related Articles:
Trustees and Fiduciaries Liability Insurance
Satisfying ERISA Bond Requirements with Employee Theft Coverage
Employee benefits liability coverage may not seem important if the
insured business does not provide group medical, life, or retirement programs.
However, most businesses offer vacation, sick leave, and parental leave, and
nearly all must provide workers' compensation, Social Security benefits, and
unemployment insurance. Errors in administering any of these could result in
lawsuits, and coverage would be possible only with the attachment of this
endorsement.
NOTE:
This endorsement provides coverage on a claims-made basis and is subject to a
retroactive date.
This analysis pertains to the 07 13 edition of this endorsement, which is largely unchanged from the previous (01 10) edition, aside from editorial adjustments.
The endorsement schedule must be completed. It includes the following information:
The definition of employee benefits includes most standard employee benefit plans. However, benefits may be provided that are not included in the definition. Any employee benefit program listed on the endorsement is added to the definition of employee benefits.
Limits must be entered in the spaces provided for Each Employee and Aggregate. They are described in the endorsement's limits of insurance section.
The each employee deductible must be entered in the space provided. It is described in the endorsement's deductible section.
The premium for the coverage provided is entered in the space provided.
This date is particularly important because it sets the earliest date by which a claim may be made. Many insurance companies insist that the retroactive date be the same as the policy effective date because doing so limits coverage. The best arrangement for the insured is to enter the word NONE. At times, a compromise can be reached by setting the retroactive date as the first date the named insured purchased coverage with a particular insurance company. That date would not advance as long as the coverage renews with that company.
NOTE:
These other persons can be employees or outside service providers because the
named insured remains legally liable for properly administering some
government-mandated benefit programs, regardless of who performs the service.
The legal obligations cannot be subcontracted away.
Coverage applies to all occurrences that are not excluded. The insurance company determines which claims it investigates and settles. The insured must report any incident that could lead to a claim, but the company determines how it handles each claim.
The most paid is the limit on the endorsement schedule. This limit applies only to compensatory damages. This coverage reimburses only for lost benefits and not for bodily injury or pain and suffering resulting from wrongful acts. It does not require the insurer to make any retroactive additions to any benefit program. Coverage does not apply to errors in payroll deductions. These deduction errors are excluded, regardless of whether the deduction was too small or too large. As in all other liability coverage forms, the insurer's duty to defend ends when the limit of insurance is exhausted by payment of judgments or settlements.
(a) The negligent act, error, or omission occurs in administering the named insured's employee benefit program.
(b) The negligent act, error, or omission was not committed before any retroactive date on the endorsement schedule or after the policy period ends.
(c) Claims for damages arising from a negligent act, error, or omission are first made against any insured during the policy period or any extended reporting period provided.
Coverage does not apply to:
This includes willfully violating statutes.
Example:
·
The employer refuses to withhold Social Security
deductions. Coverage does not apply.
· The employer uses the money from payroll deductions for group medical insurance to finance a higher lifestyle. Coverage does not apply. |
Example: Harry's
Haberdashery fails to add Erma to the group health plan. Erma has a heart
attack. It is determined that the stress from substantial unpaid medical
bills caused the heart attack. Erma's bodily injury claim is excluded.
|
Example: Harry's
Haberdashery signs an employment contract with Ernie that includes medical
coverage for him and his family, effective from his start date. Typically,
Harry does not offer this benefit, and Ernie has an ongoing medical claim
before resolution. His lawsuit for “failure to perform or breach of contract”
is excluded.
|
Example: Harry's
Haberdashery commits to funding its employee dental coverage. However, when
Harry realizes he can choose whether to pay the bill and fulfill the dental
care obligations, he starts denying dental claims. This endorsement does not
include this scenario.
|
This exclusion has three exclusion sub-sections with respect to administering benefit plans. Coverage does not apply to claims based on:
(a) The investments that fund the retirement benefit do not perform as expected
(b) The details regarding previous investment performance were inaccurate
Example: The
administrator at Harry's Haberdashery states that the annual investment
return in the past has been 10%. The actual return has been 1%. Claims based
on this are denied.
|
(c) Advice to participate or not participate
Example: The
plan administrator advises Harry's employees to refrain from participating in
the employee savings plan. Some employees heed this advice and later realize
they face tax problems they could have avoided had they not followed the
administrator's guidance. The damage resulting from advice about
participation is excluded.
|
Example: Harry
at Harry's Haberdashery decides not to purchase workers compensation
insurance, even though it is mandatory. Employees injured on the job file
claims that are excluded because Harry failed to provide workers
compensation. This endorsement does not cover these situations.
|
Damages for the employer’s liability imposed by any version of the Employee Retirement Income Security Act of 1974 are excluded.
NOTE:
Employers subject to ERISA have fiduciary responsibilities that are best
addressed by Fiduciary Liability and Employee Dishonesty Coverage Forms.
Related Article:
Trustees and Fiduciaries Liability Insurance
Satisfying ERISA Bond Requirements with Employee Theft Coverage
Coverage does not apply to claims for benefits available from other funds or other insurance.
Example: One of
Harry's recently hired employees does not enroll in the dental program. This
lapse is discovered when he needs an orthodontic procedure. Harry can obtain
dental coverage using funds deducted from the employee’s monthly paychecks,
but doing so involves a waiting period. This solves the problem quickly and
easily, which is why it is excluded. If no alternative is available to
provide the benefit, the employee benefit liability coverage form could be
the solution.
|
Example:
Harry's Haberdashery does not deduct the county income tax because the
administrator is unaware of the requirement. Fines, additional taxes, or
employee claims resulting from this oversight are excluded.
|
Example: An
employee experiences harassment by her direct supervisor and files a claim
for emotional injuries against Harry's Haberdashery. This coverage does not
apply. Employment Practices Liability coverage, however, does cover such
situations.
|
Related Article: 369.1 Overview of the ISO Employment-Related Practices Liability Program
This section in the Businessowners Coverage Form is renamed Supplementary Payments and Employee Benefits Liability. There are two changes:
a. The $250 cost of Bail Bonds f. (1) (b) is deleted.
b. The indemnitee defense provisions in f. (2) and f. (3) are deleted because additional insured endorsements do not apply to employee benefits liability coverage.
This section is revised. All of the Businessowners Coverage Form C. 2. Who is an Insured, as it relates to employees and volunteers, is deleted. The following replaces it:
2. Each of the following is an insured:
(a) Every employee now or ever authorized to administer employee benefit plans
(b) If the named insured dies, employees, organizations, or any person temporarily authorized to administer the plan are authorized only until a proper legal representative is appointed
(c) With respect to administering the named insured’s employee benefit plan, the proper legal representative when the named insured dies
D. Liability and Medical Expenses Limits of Insurance in the Businessowners Coverage Form is deleted. The following replaces it:
a. Limits of Insurance
(1) This endorsement has its own limits of insurance that are not subject to the Liability and Medical Payments Aggregate limits on the Businessowners Coverage Form.
The limits on the endorsement schedule are the maximum paid, regardless of the number of claims made, suits brought, insureds, persons, or organizations that make claims or bring suits, benefits in the benefits program, or acts, errors, or omissions.
(2) The aggregate limit is the maximum amount paid for all damages arising from negligent acts or omissions in administering the program.
(3) This endorsement has both an each-employee limit and an aggregate limit. The each-employee limit is the maximum paid for all damages sustained by any one employee resulting from one act or a series of acts committed in administering the program. This includes the employee's dependents and beneficiaries. This provision also states that payment does not exceed the amount payable in benefits by any plan in the program.
Example: If
Harry's Haberdashery has an employee benefit liability limit of $100,000 but
the group life insurance policy offers a $25,000 benefit, the maximum payout
for any claim related to the life benefit is $25,000.
|
The aggregate limit is an annual aggregate for each consecutive annual period. It begins on the effective date of each policy term. If coverage is added mid-term or the policy term is extended for less than 12 months, the limit applies to that period.
b. Deductible
(1) A deductible must be met before coverage begins. Payments are only made for amounts exceeding the deductible listed on the endorsement schedule. This applies to each employee individually and does not affect the overall insurance limit.
(2) It applies to all damages that any one employee sustains. It includes his or her dependents and beneficiaries.
(3) The terms of this insurance apply regardless of any deductible amounts applied. This includes those that involve the insurance company's right and duty to defend suits that seek damages and the named insured's (and any involved insured's) duties in case of a claim, act, error, or omission.
(4) The insurance company has the right to determine which claims it pays, the amounts, and the timing. If it pays quickly, it may pay the full amount of the claim and require the named insured to reimburse it for the deductible amount.
Duties in the Event of Occurrence, Offense, Claim, or Suit in the Businessowners Coverage Form are deleted. The following replaces it:
2. Duties in the Event of an Act, Error, or Omission, or Claim or Suit
a. The named insured should notify the insurance company promptly of any omission, act, or error that might lead to a claim. The notification must include relevant details such as where and when the act happened, along with the names and addresses of all alleged involved persons.
b. When a claim is made or a suit is brought, the named insured must immediately record the details and the date the claim was received. The named insured must then notify the insurance company in writing as soon as practicable.
c. Both the named insured and any other insured involved must:
(1) Immediately send the insurance company all legal documents it received that relate to the claim or the suit.
(2) Authorize the company to obtain records and other information as needed.
(3) Cooperate with the company during its investigation and settlement of the claim or its defense of the suit.
(4) When requested, assist the company enforce any rights it has against another person or organization that may be liable.
NOTE: In
other words, the named insured must protect the insurance company's subrogation
rights.
d. If an insured reaches any agreement regarding a claim without the insurance company's written approval, the insured is responsible for the costs of that agreement. The company is not obliged to provide any response.
Example:
Harry's Haberdashery negotiates an agreement with Velma to pay $20,000 to
settle the claim. Harry believes he is helping and conducts the negotiations
without the company's consent. The company is not obligated to reimburse
Harry for the $20,000 he paid.
|
NOTE:
This section is similar to the corresponding section in the Businessowners
Coverage Form.
This coverage endorsement includes an extended reporting period provision because this is claims-made coverage.
a. If this endorsement is canceled or not renewed, the named insured has the right to purchase an extended reporting period. This right applies when a renewal is issued with a retroactive date later than the one on the expiring endorsement or when the renewal is not issued on a claims-made basis.
b. The extended reporting period does not extend the policy term or change the coverage. Claims must be reported for acts, errors, or omissions. Those acts, errors, or omissions must have been committed before the end of the policy period but not before the endorsement’s retroactive date. Once in effect, the extended reporting period cannot be canceled.
c. The named insured has the right to purchase a five-year extended reporting period. However, the named insured has only 60 days after the policy expires to exercise that right. The request must be in writing, and the extended reporting period does not take effect until the named insured pays the premium.
The insurance company determines the additional premium charge based on its rules and rates in force at the time. The insurance company can consider any and all of the following in making the charge:
(1) The number and types of programs insured
(2) The previous amounts and types of insurance coverage
(3) The limits available under this endorsement for future claim payments
(4) Any other related factors the company determines
The additional premium charged cannot be more than 100% of the annual premium for the expiring employee benefit liability endorsement.
The extended reporting period defines the coverage’s terms and conditions and should align with the overall endorsement. When this coverage is active, the endorsement clarifies that it applies on an excess basis over any other valid and collectible coverage in force after the extended period.
NOTE: BP
04 99–Extended Reporting Period for Employee Benefits Liability Coverage is
used to extend the coverage.
d. If an extended reporting period is added, an aggregate limit applies for claims first received and recorded during the extended reporting period. The aggregate is equal to the aggregate limit on the endorsement schedule.
NOTE: If
the named insured does not buy an extended reporting period, the deadline to
file a claim ends on the coverage expiration date. There is no automatic
extension or grace period.
These definitions are added to the Businessowners Coverage Form F. Liability and Medical Expenses Definitions.
a. Administration
This term has three parts. The first concerns providing information to employees, dependents, and beneficiaries regarding eligibility for and the scope of the named insured’s employee benefit programs. The second concerns how employee benefit program records are handled. The third concerns commencing, continuing, or terminating an employee’s participation in any benefit within the employee benefit program.
NOTE:
This definition excludes payroll deduction issues. It covers cases where an
employee isn't enrolled in a benefit program due to administrator negligence.
However, if a payroll deduction isn't made, that part isn't covered. The
insured must be aware of these coverage limits. A typical situation involves
failing to properly enroll an employee and failing to make payroll deductions.
In such cases, this endorsement only covers part of the claim.
b. Cafeteria Plans
These are plans that are authorized by applicable laws. They permit employees to make benefit choices and pay for them with pre-tax dollars.
c. Claim
This is any demand or suit brought by an employee or by the employee's dependents or beneficiaries for damages resulting from an act, error, or omission.
d. Employee benefit program
Any program that provides one or more of the following benefits under a cafeteria or other plan:
(1) Group life insurance, health, group accident, hearing, vision, dental plans, and flexible spending accounts are available. Only employees can subscribe to these benefits, usually based on their eligibility. Although only employees can enroll, dependents and beneficiaries can also be included as eligible dependents or beneficiaries in the plan.
(2) Profit sharing, employee savings, employee stock ownership, pension, and stock subscription plans are available. Only employees can subscribe or enroll, with eligibility determining participation. However, dependents or beneficiaries of eligible employees can also be included in these plans as dependents or beneficiaries.
(3) Unemployment insurance, social security benefits, workers compensation, and disability benefits
(4) Vacation time (including the ability to buy and sell such time) and leave of absence programs that include military, maternity, civil, and family leave. It also includes tuition assistance, transportation, and health club subsidies.
(5) Any other benefits on the endorsement schedule or added by endorsement
These definitions in the Businessowners Coverage Form, F. Liability and Medical Expenses Definitions, are revised:
Any person who is actively employed. It also includes persons on a leave of absence, disabled, retired, or formerly employed. Leased workers are considered employees. Temporary workers are not.
A civil proceeding that alleges damages resulting from an act, error, or omission covered by this insurance. This includes arbitration proceedings in which damages are claimed and the insured submits, or has submitted, with the insurance company's consent. It also includes any other alternative dispute resolution as the arbitration provision stipulates.
2. This coverage is excess, regardless of any other insurance, if the other coverage was effective before this endorsement’s coverage and if that coverage applied on an occurrence basis rather than a claims-made basis.
However, for the other coverage to replace this coverage as the primary provider, this coverage must not have a retroactive date on the endorsement schedule, or, if there is a retroactive date, the other insurance must extend beyond that date.
NOTE: H.1
and H.3. of the Other Insurance Condition are unchanged.