Payroll service providers regularly face demands from their customers to defend and indemnify lawsuits filed against their customers by employees alleging various Labor Code violations.  For many providers, the cost of defending and indemnifying their customers is viewed as a cost of doing business, but that should not be the case. In his article for HR.com, Partner Michael Gehrt discusses why payroll service providers should turn to their professional liability or errors and omissions (“E&O”) insurer for insurance coverage for these types of customer demands, and how providers can respond if the insurer attempts to wrongfully deny coverage for claims.

“Insurers may try to rely on various common exclusions to avoid coverage obligations.  However, in most cases, those exclusions do not apply,” Gehrt wrote. “Accordingly, payroll service providers should carefully consider the insurance coverage that is potentially available, but often overlooked or incorrectly denied by insurers, for these types of demands.”

Read the full HR.com article here.