Are you thinking about hiring some help this summer? Perhaps you are looking for a nanny for the kids, a groundskeeper for your summer cottage or a chef for your summer entertaining.
Additional help can be greatly beneficial to a busy family. However, before you hire an employee, it is important that you take some time to understand both your potential exposure and liability as an employer. High net worth (HNW) families have more points of vulnerability to unscrupulous employees and are a more attractive target for liability suits than other families who hire domestic staff. One step that you can take to protect yourself and your family from these kinds of risks is to ask certain questions about the relevant types of insurance coverage:
- Homeowner’s Insurance:
- Does your homeowner’s insurance policy cover injuries to an employee on the job?
- Are your policy limits sufficient to pay all damages in the event of an accident with serious or lifetime injury?
- Do you have insurance that covers you if an employee’s acts or negligence causes injury to someone else or their property?
- Workers’ Compensation Insurance:
- If your homeowner’s insurance does not cover the liabilities mentioned above, do you need to buy workers’ compensation insurance?
- Do you live in a state where Workers’ Compensation insurance is required?
- If so, your homeowner’s and umbrella policies generally will not cover those employees who are required to be covered by a workers’ compensation policy.
- In these states, household employers must carry a workers’ compensation policy for any employee who meets the criteria for required coverage (for example, in Michigan, this means employees who work 35 hours or more per week for at least 13 weeks during a 52-week period).
- Employees who do not meet this criteria are likely covered by your homeowner’s and umbrella policies, but you should verify this with your insurance provider.
- A hire from an employment agency may have workers’ compensation coverage through the agency (although you need to verify this).
- Some payroll services can handle this insurance for you and collect the premium in small payments with each payroll run.
- Auto Insurance:
- Are you covered if your employee will be driving in the course of his/her daily duties?
- Does your hiring process check if the employee has auto insurance?Require employees who will be driving in the course of their work duties to carry a personal auto policy with at least $500,000 in liability coverage.
- Require employees to submit proof of insurance at the time of employment and periodically thereafter, and make continuing coverage a condition of the position.
- Does your hiring process check his/her driving record so you can’t be liable for negligent hiring or entrustment? Does your process recheck the driving record periodically?
- If the employee will be driving one of your cars, are you prepared to accept the liability for his/her accidents?
- Your agent or attorney should be able to assist you in choosing the appropriate level of liability coverage for your particular situation.
- You will also need to contact your insurance company to add the employee as a driver on your policy.
- If the employee is driving his/her own car for work duties, are you aware that your insurance is liable for any damages not covered by the employee’s policy? (This is one reason to require employees to carry $500,000 in liability coverage.)
- Are you covered if your employee will be driving in the course of his/her daily duties?
- Umbrella Policy:
- Do you have an umbrella insurance policy to cover damages incurred over and above your homeowner’s and vehicle insurance limits? Your attorney or agent can guide you in choosing the appropriate coverage amount.
- Other Insurance Options for HNW Families:
- Would an Employment Practices Liability Insurance (EPLI) policy designed for HNW families be appropriate for you? This provides coverage to you against employee claims alleging discrimination, harassment, wrongful termination and other employment issues, plus it can provide reputational and other coverages.
- Would you want an Employee Dishonesty Policy which could protect you from employee theft, forgery, identity fraud, credit card fraud and other wrongful conduct?
- Does your insurance provider have a relationship with a professional security firm that conducts employee background checks for HNW families? If so, these checks are usually done at a reduced rate or as a complimentary service for the insurance provider’s HNW clients, since families that hire employees who have passed a professional background check typically have reduced claims.
Protecting your family is of paramount importance. Should you need assistance assessing your insurance needs and preventing coverage gaps or overlap, please consult Carly Zagaroli in our Insurance Law Practice Group, Mark Harder, chair of our Private Client and Family Office Practice Group, or your Warner attorney.
