On-Call Insurance: What Small Business Owners Need to Know

Running a small business often means having employees available outside regular business hours. Whether you operate a plumbing company, IT support firm, medical practice, or property management business, on-call employees are essential to maintaining customer service and handling emergencies. However, many small business owners don't fully understand the insurance implications and legal requirements surrounding on-call work arrangements.

This comprehensive guide will help you navigate the complex landscape of on-call insurance, workers' compensation coverage, liability protection, and compliance requirements that affect your business and employees.

Understanding On-Call Work and Its Insurance Implications

Whether on-call time is hours worked under the Fair Labor Standards Act (FLSA) depends upon the particular circumstances, and generally, the facts may show that the employee was engaged to wait (which is work time) or the facts may show that the employee was waiting to be engaged (which is not work time).

This distinction is crucial because it affects not only wage obligations but also insurance coverage requirements [1].

When employees are considered "working" during on-call periods, they must be covered by your workers' compensation insurance. If an injury occurs during compensable on-call time, your business could face significant liability without proper coverage.

Workers' Compensation Coverage for On-Call Employees

Workers' compensation insurance is mandatory in most states for businesses with employees.

There are workers' compensation programs at the state and federal levels, with state programs handling claims for employees of private organizations and state and local governments.

The critical question for small business owners is: When are on-call employees covered by workers' compensation? The answer depends on whether the employee is considered "in the course of employment" during the on-call period [2].

When On-Call Time Requires Coverage

Your workers' compensation policy should cover on-call employees when they:

Are required to remain at the business premises or a specific location
Have significant restrictions on their personal activities during on-call periods
Must respond within a very short timeframe that prevents normal personal activities
Are actively performing work duties, even if remotely
Suffer injuries while responding to an on-call emergency

Additional constraints on the employee's freedom could require this time to be compensated, which means it should also be covered under your workers' compensation policy [1].

Reviewing Your Workers' Compensation Policy

Small business owners should carefully review their workers' compensation policies to ensure on-call employees are properly covered. Key questions to ask your insurance provider include:

Does the policy cover employees during all on-call periods, or only when they're actively working?
Are injuries sustained while traveling to respond to on-call emergencies covered?
How should you classify on-call employees for premium calculation purposes?
What documentation is required to prove an injury occurred during covered on-call time?

Many small businesses underestimate their workers' compensation exposure by not properly accounting for on-call hours when calculating premiums. This can lead to significant unexpected costs during policy audits.

General Liability Insurance Considerations

Beyond workers' compensation, your general liability insurance plays a crucial role in protecting your business when employees are on call.

A business owner's policy (BOP) is the most commonly purchased policy by small businesses and includes general liability, commercial property/business property coverage, and business interruption insurance, with general liability protecting the business from liability claims alleging bodily injury, property damage, libel, and slander.

Coverage Scenarios for On-Call Work [3]

Your general liability policy should address situations such as:

Third-Party Injuries: If an on-call employee accidentally causes injury to a customer or member of the public while responding to a call, your general liability insurance should provide coverage.

Property Damage: When on-call employees access customer properties or business locations, there's potential for accidental property damage that your policy should cover.

Professional Errors: For service-based businesses, errors made during on-call work could lead to claims. Consider whether you need professional liability or errors and omissions insurance in addition to general liability coverage.

Vehicle-Related Incidents: If on-call employees use personal or company vehicles to respond to emergencies, ensure you have appropriate commercial auto insurance. Standard general liability policies typically don't cover vehicle-related incidents.

Business Interruption Insurance and On-Call Operations

Business interruption (BI) insurance, also called business income insurance, helps small businesses protect against monetary losses due to periods of suspended operations when a covered event, such as a fire, occurs and causes physical property damage, allowing businesses to pay fixed expenses, including costs incurred while operating at an offsite location, while the property is closed for repairs and restoration, and reimbursing owners for lost revenue.

For businesses that rely on on-call employees, business interruption insurance takes on special importance. If a covered event prevents your on-call employees from responding to customer needs, you could lose significant revenue [3].

It is estimated that between 30-40% of small business owners carry business interruption insurance.

Consider whether your business interruption policy accounts for: [3]

Lost revenue from inability to provide on-call services
Extra expenses to maintain on-call coverage during business disruptions
Costs of temporary communication systems if your on-call notification system fails
Reputational harm from inability to respond to on-call emergencies

Compliance with Federal and State Wage Laws

Insurance considerations for on-call employees are closely tied to wage and hour compliance. The FLSA establishes when on-call time must be compensated, which directly impacts your insurance obligations.

An employee who is required to remain on call on the employer's premises is working while "on call," while an employee who is allowed to leave a message where he/she can be reached is not working (in most cases) while on call, though additional constraints on the employee's freedom could require this time to be compensated.

Misclassifying on-call time can lead to wage and hour violations, which may not be covered by your employment practices liability insurance (EPLI). Review your EPLI policy to understand what wage and hour claims are covered and what exclusions apply [1].

Key Insurance Policies for Businesses with On-Call Employees

Small business owners with on-call employees should consider the following insurance coverage:

Workers' Compensation Insurance: Mandatory in most states and essential for covering on-call employee injuries. Ensure your policy properly accounts for on-call hours and activities.

General Liability Insurance: Protects against third-party bodily injury and property damage claims arising from on-call work.

Commercial Auto Insurance: Necessary if employees use vehicles to respond to on-call situations. Personal auto policies typically exclude business use.

Professional Liability/Errors & Omissions Insurance: Critical for service businesses where on-call employees make professional decisions that could lead to claims.

Employment Practices Liability Insurance (EPLI): Covers claims related to employment practices, including potential wage and hour disputes over on-call compensation.

Cyber Liability Insurance: Important if on-call employees access sensitive data remotely or use digital systems to respond to emergencies.

Business Interruption Insurance: Protects revenue when covered events prevent on-call operations.

Best Practices for Managing On-Call Insurance Risks

To minimize insurance gaps and ensure proper coverage for on-call employees, implement these best practices:

Document On-Call Policies Clearly: Create written policies that define when employees