A staffing employee says a benefits-related mistake left them without the coverage they expected. Should the agent look at employee benefits liability, fiduciary liability, or both?
The answer depends less on the benefit at issue than on what the staffing firm or the responsible individual was doing. Employee benefits liability focuses on certain errors or omissions in administering a benefits program. Fiduciary liability involves responsibilities tied to managing or overseeing a benefit plan.
When Benefits Administration Creates the Exposure
Benefits administration includes the day-to-day work required to implement a benefits program. WWSPI’s employee benefits liability coverage identifies three areas: counseling employees and dependents about offered plans, handling benefits records, and effecting or terminating an employee’s participation in a plan.
The Department of Labor describes a case in which an employer mistakenly kept a former employee on its health plan for two months after his employment ended. The employer later canceled the coverage retroactively, leaving him with $200,000 in medical bills and a dispute over his opportunity to elect COBRA continuation coverage. The employer was not a staffing firm, but the case shows how an error involving participation or termination can create substantial consequences.
Staffing firms may administer benefits for both temporary and in-house employees, increasing the number of enrollments, terminations, records, and employee communications they handle. Those benefits administration responsibilities can create additional opportunities for errors.
When Discretion Changes the Analysis
Fiduciary liability moves the review beyond carrying out administrative tasks. A key distinction is discretionary authority over plan management, benefits, or assets. WWSPI’s discussion of fiduciary liability for staffing firms explains why that authority changes the exposure.
Consider someone deciding which investment options a retirement plan will offer. The responsibility involves judgment about the plan itself rather than simply entering information, maintaining records, or processing enrollment.
A staffing firm may handle routine benefits administration while certain individuals also exercise discretion over plan management or assets. Agents need to understand who performs each function because the exposures tied to administrative tasks differ from those tied to fiduciary responsibilities.
How Should Agents Tell the Difference?
Start with the specific act or decision at issue. An enrollment mistake, an incorrect termination date, or an inaccurate benefits record points to an administrative responsibility. A decision involving plan assets, plan management, or discretionary authority calls for a closer look at fiduciary exposure.
Next, compare the responsibility with the policy language. Definitions, exclusions, conditions, and provisions addressing fiduciary-related claims can determine which coverage deserves examination. Agents should not assume employee benefits liability includes fiduciary responsibilities — or that every benefits-related decision fits into one category.
One situation can also raise more than one coverage consideration. The administrative task and the authority behind it both need a closer look.
Start With the Responsibility, Not the Policy Name
A benefits review should map out the staffing firm’s responsibilities. Which employees counsel participants, maintain records, process enrollments, or terminate participation? Which individuals have discretion over the plan itself?
Once those responsibilities are clear, agents can compare them with the client’s employee benefits liability and fiduciary coverage rather than relying on policy names alone.
Call World Wide Specialty Programs to review a staffing client’s employee benefits liability and fiduciary liability exposures and discuss available coverage options.
About World Wide Specialty Programs
For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and are committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.