Contrary to assumption, your employer’s insurance also may not adequately
protect you. For example, an employer’s insurer may not be obliged
to defend or pay a judgment against the employee. Employers ordinarily
and automatically share liability with their negligent employee; therefore,
a judgment against the employee usually brings a simultaneous judgment
against the employer. The employer’s liability would be paid by
the insurer, which would normally cover the employee. That’s the
theory. Nevertheless, employees who rely solely on their employer’s
coverage run several risks.
One risk is that you have no protection if your employer is not liable
for an error or omission that occurred outside the scope of employment.
Or you lose your protection if your employer’s policy is terminated
without your knowledge. Or your employer may have inadequate insurance.
Or too many employees may be sued on the same claim (as is often the case)
and the shared liability limits are too low. Or your employer’s
plan may be a claims-made policy that will cover you only for claims made
during the policy period. But you may change jobs
before a lawsuit is filed. Or lose your job. If you are sued
after your employment ends, you then have no coverage. That’s why we urge
our clients to review their employer’s policy. Your employer’s
insurer must defend and protect you and your employer. Evaluate your employer’s
financial stability. A company in financial difficulty may lose, reduce
or cancel their insurance. That’s why every employee should buy
their own supplemental insurance. It’s inexpensive and essential.