Q

How does the employee benefits liability endorsement on a CGL policy respond to mistakes an employer makes in explaining benefits to an employee? For example, an administrator with one of the businesses we insure incorrectly advised an ex-employee that, under COBRA, health coverage could be extended beyond the eighteen months that actually are available.

Would the employee benefits endorsement respond to this type of claim?

Indiana Subscriber

A

The ISO employee benefits liability endorsement, CG 04 35 03 05, is designed to respond to damages that the insured becomes legally obligated to pay because of mistakes made in the administration of an employee benefits program. It sounds as if misadvising an ex-employee about the length of COBRA would fall within that category as a cause of loss, but what was the damage? If it simply means that a person is told that COBRA does not apply, there probably wouldn't be any damages.

However, if an ex-employee became ill, went to the hospital, incurred bills, and then was told her insurance wasn't in force she might go back to the insured for payment of the bills. That would constitute damages.

One cautionary note: many of these types of endorsements are written on a claims-made basis (as is CG 04 35 03 05), and there may be variations among insurance companies. Read the form carefully to be sure it corresponds with the wording on CG 04 35 03 05.