Ing + McKee

Place Insurance as Carefully as You Place Employees

October 25, 2023

It can take some real finesse to match job candidates with the right employer and position. There are many personalities in the mix and real financial ramifications at play that can generate significant risk for your firm. Your company could suffer serious financial losses from a claim lodged against you or damage to your property.

Here are some of the most important safeguards needed to protect your professional assets.

Risk management

Make minimizing risk an essential part of every transaction. This includes thoroughly documenting reviews of candidate qualifications, reference checks, background checks, confidentiality clauses and more. You should also screen each employer to make sure they provide a suitable workplace environment with appropriate health and safety procedures in place. Be on the lookout for any history of harassment, discrimination or other unacceptable employment practices.

These and other basic risk management steps help minimize the likelihood that you’ll recruit an unqualified or unreliable employee or that you’ll place someone in a compromised work position. Simple due diligence may prevent a claim from ever materializing. But if one does, documented proof that you took the necessary steps to reduce harm may be an important part of your defense.

Of course, no matter how conscientious or careful you are, mistakes and accidents do happen. That’s why the right insurance coverage is so important. Given the unique nature of employment placement services, there are some specific insurance policies you should discuss with your broker.

The right insurance

Professional liability insurance, also referred to as errors and omissions (E&O) insurance, is something no staffing agency should go without.

It helps cover settlement costs and any legal fees or expenses required to defend against claims of negligence, misrepresentation or inaccurate advice.

Given the range of industries, employers and employees you regularly screen and interact with, there is a nearly limitless list of potential liability claims, but some simple illustrations include:

  • An accusation that you placed a candidate into a position they were not qualified to handle, leading to negative consequences for the employer, including financial loss and damage to their reputation
  • Failure to meet the requirements outlined in your contract, such as finalizing a staff position by a certain date
  • An assertion that you inaccurately represented an opportunity, leaving the employee feeling that their career was compromised

Much of your job involves judgments and decisions based on reasonable expectations and the talents and abilities of others. Because there is tremendous gray area when determining whether you followed expected professional protocol, professional liability is particularly important for employment placement firms.

Be sure to discuss the details of any professional liability policy you are considering with your broker. You’ll want to confirm that it includes “vicarious liability,” meaning coverage extends to the individuals you are placing into other firms as temporary or contract employees. By extension, they may be considered a representative of your company instead of an employee of the company you are working with, so they would need coverage under your policy.

Your insurance broker can also help you define when and to whom professional liability coverage applies so you can clearly delineate this in your service contracts as well.

Some notes of caution:

It’s important to understand the difference between professional liability and directors and officers (D&O) insurance. While they both protect against claims of poor judgment or failure to perform a job as expected, D&O insurance covers only those in your corporate management or officer roles. You may still want D&O for additional protection, but it doesn’t replace professional liability for your entire team.

Professional liability also does not cover:

  • Claims of bodily injury or damaged possessions — you’ll need a general liability policy for that
  • Instances where you are found guilty of malicious, dishonest, criminal or illegal acts

Cyber insurance protects against both your liability and damage to or shutdown of your own systems. Most employment placement firms store and transmit a considerable amount of confidential and personal information online, which makes a stand-alone cyber policy crucial. This type of coverage can be tailored to your specific exposures so you’ll be able to address the costs associated with lost or corrupted data, identity theft, cyber extortion, business interruption and reputation recovery.

Commercial general liability (CGL) covers medical and legal costs related to bodily injury or damage to the personal property of non-employees. It also covers claims of slander (for example, if a potential new hire says you spoke ill of their abilities) and advertising injury. You don’t even need to be found at fault for CGL to prove valuable, as there can be significant costs associated with legally defending yourself.

Business or commercial property insurance protects against damage, theft or the complete loss of your business’s physical structure. It also covers the contents inside, including furnishings and office equipment. Even if you rent your business space, you still need commercial property insurance to cover the contents of your building. This type of coverage is equally important for home-based businesses because homeowners insurance policies typically don’t extend to business losses.

Discuss any exclusions with your insurance broker, as most property policies do not cover losses due to floods, sewage backup or earthquakes. If you are concerned about those scenarios, they can be covered by adding a specialized policy.

Commercial auto is imperative if you or your employees drive on behalf of your business, regardless of whether it’s in a business-owned or personal vehicle. Commercial auto insurance provides important financial protection from the costs of damage to your vehicles or damage to other vehicles caused by your drivers. It also helps with medical expenses and other financial losses sustained by any injured parties, whether your driver is at fault or it’s the other driver and they’re un- or underinsured.

Talk to your broker about non-owned auto, medical payments, comprehensive and uninsured/underinsured motorist coverages.

Though the primary function of staffing agencies is to place applicants with other companies, your business has both property and liability risks that can cause financial havoc. A properly designed insurance program can protect you from major losses and keep you in operation, even if you are hit with a disaster or liability claim.

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