Most restaurant owners offer at least some employees an employee benefits program of some type. It may be a retirement account, health insurance, life insurance or even disability insurance. How you manage and administrate these benefit programs generates some risks for you and your company. Clerical errors or bad advice can leave your company facing a lawsuit and the expensive costs of defending yourself. Insurance protection is needed, but what it the correct type of protection for you?
Let’s take a brief look at two different types of protection for employee benefits administration. They are employee benefits liability insurance and fiduciary liability insurance. It helps to look at each one separately first.
Employee benefits liability insurance is a form of liability insurance that can be added on to your restaurant business owners insurance policy. Usually the coverage limit will often be the same as the liability limit on your business owners policy but since this is not always true, it is important for you to make sure that you know the limit of protection that you are buying. This protection is very affordable when add it to an existing businessowners policy. The protection here is aimed at covering you and your restaurant from losses caused by administrative mistakes in the handling of the employee benefits. For example, say you hired a new manager and agreed to provide him with health insurance but failed to actually send in the applications to add him to the policy. A year later he is diagnosed with cancer and the health claim is not covered since your clerical error meant that he was never actually added to the group health insurance policy. In this case your employee benefits liability insurance should protect your restaurant from having to pay for his medical bills.
Fiduciary liability insurance is a very different type of policy. This insurance protection is for claims arising out of wrongful acts. Wrongful acts can be negligent acts, errors, or omissions that result in an actual or an alleged breach of your fiduciary duties as imposed by ERISA in the administration of employee benefits. The most common of these is giving bad investment advice about which investment choices an employee should use when investing 401k funds but other claims are more subtle. For instance you could even be held liable for your choice of the 401k investment plan or even for your selection of which plan administrator you use to maintain your restaurant’s 401k plan.
So which type of policy do you need? We tend to believe that fiduciary liability insurance is best suited for restaurants that offer a retirement plan benefit of some kind for their employees. But in truth you can have a devastating clerical error associated with running a retirement plan. In that case, having both types of protection would be important. If you don’t provide any employee benefits where the fiduciary nature of your involvement could get you in trouble, then perhaps employee benefits liability insurance is all that you need. Some restaurants may need both forms of protection while others may only need one or the other. What is most important here is to clearly understand the difference in these two forms of protection so that you can best decide what you need for your particular restaurant.
Clinard Insurance Group, located in Winston Salem NC, is a niche player in the NC restaurant insurance industry. We insure over 100 restaurants of all types, all across North Carolina and South Carolina. We have 5 distinct restaurant insurance programs, a fine dining restaurant insurance program, a casual dining restaurant insurance program, a fast food restaurant insurance program, a bar and grill and tavern insurance program and a special insurance program for catering companies. If we can help you with any of your restaurant insurance questions or needs, please call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.
Restaurantanswerguy's Blog 