Excess Liability

Minimizing Risk when Employing Household Staff

Most people acquire their wealth through career success. With time at a premium, private staff—nannies, housekeepers, drivers, gardeners, chefs, and others—often become critical members of the household. 

From an insurance standpoint, the presence of full-time staff can lessen the chance of burglary and overall likelihood of property damage.

However, because many families develop strong bonds with their household staff, the line between employee and employer can blur easily. Additionally, unfettered access to family and valuables makes it imperative to exercise extreme diligence with staff management. If a working relationship ends, employers’ assets and privacy might be compromised. 

Here are two real-life claim scenarios:

  • A gardener was fired for habitual tardiness. She sued her employers for wrongful termination, alleging both age and sex discrimination. Further, she claimed failure to pay overtime wages and other employment law violations. In addition to the legal concerns, the employers’ private lives were scrutinized publicly because of the allegations. 
  • A housekeeper was let go because her employer regarded her performance as inadequate. When the employer hired a new, younger housekeeper, the original employee sued for wrongful termination and age discrimination. The lawsuit included intimate and sensitive information about the employer’s private family life.

What You Can Do

1) Consider your home a workplace.

Corporate human resources departments formalize everything from recruitment to annual performance reviews. If a problem arises, documentation can help protect the company. Take that same approach with your household staff. Reputable firms can help you screen candidates, conduct effective interviews and implement structure once employees are on board.

For example, develop specific job descriptions, a household employee manual, and always adhere to legal requirements such as paid time off, sick leave and workers’ compensation.  

2) Manage proactively. 

One home’s rules may not apply in another. Think about the features of your residence and the related instructions you want to impart. At AIG, for example, there was an insurance claim resulting from art damaged by a well-intended housekeeper. She used the wrong cleaning method, ruining the surface of the piece. Proper training could have avoided that loss.

Additionally, employees should not be expected to operate outside their areas of expertise. Another claim: A child was seriously injured on a backyard playground during a friend’s party. The parents sued, alleging failure to provide adequate supervision and security. As it turned out, the hosts had asked an on-staff maintenance worker to help out during the party, even though he had no training or childcare background.

3) Obtain the right insurance coverage. 

Ensuring adequate insurance protection is critical for any employer. The following coverages are designed to protect your family, assets, and private staff from common exposures:

  • Excess liability insurance responds after primary coverage limits on home, automobile or watercraft policies are exceeded. In today’s litigious society, jury awards and settlements very often eclipse those initial limits.
  • Employment practices liability insurance responds to claims of wrongful termination, sexual harassment, discrimination, and other employment-related suits private staff may bring. This insurance usually is an add-on to an excess liability policy, but a stand-alone policy can be purchased when appropriate.
  • Workers’ compensation insurance covers expenses related to medical care and rehabilitation if an employee is injured on the job.

In general, household staff allow us to focus on what matters and are an enormous help. With simple management techniques and insurance coverages, you can rest assured that their help is never a hindrance.