Employment Practices Liability Insurance (EPLI)

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Who Should Get EPLI Coverage?

As an employer, every business faces the possibility that it will be the target of legal action from past, present, and prospective employees.

EMPLOYMENT PRACTICES LIABILITY INSURANCE

You Can’t Always Prevent a Lawsuit, But You Can Help Protect Your Business Against One

You think of your employees like family, why would they ever file a lawsuit against you?

Employers don’t have to do something wrong to be sued. Unfortunately, employers still end up paying substantial legal fees to defend themselves against allegations of wrongful termination and discrimination among other employment practices-related claims. And full-time employees aren’t the only ones filing lawsuits. You can face allegations from temporary employees, seasonal workers, and even independent contractors.

If You Have Employees, You Should Consider Employment Practices Liability Insurance

The Hartford is dedicated to helping protect employers. It’s why we make it easy to increase the limit of your EPLI coverage beyond what’s available through your Business Owner’s Policy’s base coverage. And this coverage protects your business from employment-related claims—both alleged and actual—for acts including:

•  Discrimination
•  Harassment
•  Retaliation
•  Violation of the Family and Medical Leave Act
•  Wrongful discipline
•  Wrongful failure to promote
•  Wrongful termination

Prevention Is Your Best Protection

The Hartford does more than just provide coverage. We’ve developed a comprehensive program to help employers deal with the root causes that lead to lawsuits. For example, we’ve developed hartfordhelp.com¹, a proprietary website that provides employers with resources such as:

•  Web-based training on sensitive topics, from sexual harassment to wrongful termination
•  Current articles on employment practices trends
•  Model employment practices and employee handbooks

The policies we provide cover a wide spectrum of employee-related claims and offer loss prevention programs to minimize the risk of EPL insurance claims. We can provide some of the most comprehensive Employment Practices Liability (EPL insurance) Policies offered to small businesses.

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Consider the Following Statistics:

From October 1, 1993 through September 30, 1994, the Equal Employment Opportunity Commission and related local and state agencies received 156 discrimination complaints. As of May 1, 2003, over 100,000 complaints had created a backlog at the Equal Employment Opportunity Commission, and the average complaint took more than a year to handle.

Over 13,000 complaints of sexual harassment were filed in 2002 the EEOC. Settlements for cases exceeded 50 million dollars in 2003. Defense costs were several times this amount.

In a recent telephone poll it was found that almost 31% of all female workers claimed to have been the object of sexual at work. Sexual harassment complaints were also made by about seven percent of all male workers.

Congress has created new grounds for employers to be sued through legislation like the Americans With Disabilities Act and the Family Medical Leave Act.

The numbers of employment-related claims are increasing, and so is the potential financial risk to your business. Defending a claim of discrimination or wrongful termination -- whether you are guilty or innocent, or even if the claim is fraudulent or groundless -- can be very costly. Your company's financial resources can be seriously threatened by the potential exposure for a money damages award.

This increased business risk is very real, and it is also increasingly likely that your current insurance DOES NOT COVER employment-related claims. Employment-related claims are specifically excluded from most comprehensive general liability policies. For small for-profit employers, a directors and officers policy may offer a limited form of EPL insurance coverage, but will probably not extend coverage to the business entity. Other forms of insurance (such as fiduciary liability coverage) are unlikely to cover claims of this type:



Discrimination
Negligent Hiring
Negligent Supervision
Negligent Promotion
Negligent Retention
statute Violation
Disabilities
Mental Anguish
Loss of Consortium Sexual harassment
Wrongful Termination
Libel
Slander
Breach of Contract
Invasion of Privacy
Drug Testing
Emotional Distress
Wage and Hour Disputes


Responding to the escalation in employment-related EPL insurance litigation and the financial risk to small business for employment related claims, we are offering our clients the service of shopping for Employment Practices Liability. Drawing on our many years of experience in handling claims for our clients, we have developed specific relationships with carriers who specialize in, and have designed, a comprehensive program to assist your business in reducing its exposure to claims by employees.


Employment Practices Liability

Employment Practices Liability Insurance protects you against legal actions brought against you by your employees as a result of wrongful employment practices. Every employer faces an employment practices liability exposure. You have an exposure when you interview, hire, do not hire, employ, promote, discipline, pay and fire. Companies are more likely to be sued by their OWN EMPLOYEES rather than outside third parties.

Types of Employment Related Claims Covered by this policy include:

Discrimination
Harassment
Hostile Work Environment
Wrongful Termination
Failure to Hire or Promote
Inappropriate Employment Conduct such as:

Wrongful Demotion
Sexual Orientation
Retaliation, Libel, Slander
Defamation, Humiliation
Emotional Distress, Mental Anguish
Wrongful Discipline, False Imprisonment
Negligent Evaluation
Invasion of Right of Privacy
Deprivation of Career Opportunity
Named Insured includes:

Company, Partners, Officers, and Spouse
Managers, Supervisors and Employees
Temporary and Leased Workers
Independent Contractors
If you are an employer, this is a very important coverage to have in your portfolio of insurance.



Employment practices liability insurance

By Mr. France


One way to curtail EPLI claims is to prepare and train personnel to better understand the situations that can put your company in jeopardy of facing costly lawsuits. Many EPLI claims are due to lack of written human resources procedures or failure to adhere to the ones that are in place. Ignorance of the type of behavior that is not appropriate also can lead to claims because speech or activities that may have been tolerated in the past are in violation of today’s laws—state and federal. Companies should realize that one individual’s conduct could cost hundreds of thousands of dollars in court.

“Employment practices liability insurance is an essential component of a well-constructed insurance portfolio,” says Salvatore Pollaro, senior vice president for management solutions at Zurich. “As the impact of employee litigation grows, corporations are recognizing that even one claim could have catastrophic results to an organization’s bottom line and reputation. Claims of wrongful termination, sexual harassment and discrimination continue to escalate, and even if a claim is ultimately deemed groundless, the damage it may leave on a company’s reputation may be substantial.”

Pollaro continues: “Add to this the fact that numerous state and federal laws and regulations govern nearly every aspect of employment practices, from hiring to employee management and promotion to termination. In this environment, EPLI coverage has become less of a discretionary coverage and more of a necessity. Policies typically cover employee claims alleging wrongful employment acts, wrongful termination or treatment, discrimination against any protected class, harassment and common law violations.

“Adopting best practices and formalized company employment policies may help forestall employee claims,” states Pollaro. “However, employment practices claims are increasingly viewed as risks that jeopardize corporate assets and therefore need to be insured.”

Federal laws that address employment liability include:

• Title VII of the Civil Rights Act of 1964 and the Civil Rights Act of 1991, which amended Title VII to include additional recoveries for the claimant and gave claimants the right to a jury trial

• The Family Medical Leave Act

• The Age Discrimination in Employment Act (ADEA)

• The Americans with Disabilities Act (ADA)

Although the market for EPLI is generally soft, some classes are not easy to find a home for, with certain medical professions at the top of the list.

Kimberly Byrd, executive vice president of Tennant Risk Services Insurance Agency, says, “Health care providers, including physicians’ and dentists’ offices, present a more difficult employment practices liability insurance exposure. Statistically, employment-related claims occur more frequently with health care providers than any other types of business. In addition, health care providers have patient and vendor discrimination and harassment exposures that may be covered within an EPLI policy.”

She goes on to describe certain claim scenarios that are unique to the health care arena. For example, Byrd points out, “A claim could arise from a patient alleging that he was refused dental treatment because he was HIV positive, or there could be a claim involving an allegation that a patient was sexually harassed by her doctor. These exposures are not picked up under the provider’s general liability or medical malpractice policies.”

Byrd says that “EPLI premiums are extremely reasonable even when third-party discrimination is included. A small doctor or dental office can expect to pay under $2,000 for a million dollars of coverage including the optional third-party coverage.”

Although the rates in the EPLI market are mostly level overall, some prime risks are seeing lower rates at renewal. Many suggest, however, that agents should look to use any savings to improve coverage. For example, agents might be able to purchase defense cost coverage outside the overall limit. This could save the client hundreds of thousands of dollars if there is a claim.

Chris Ketcham, vice president at Great American Insurance Group’s Executive Liability Division observes: “The smaller employer segment [fewer than 250 employees] is a promising market for unbundled EPLI coverage. Small employers are unaware that defense costs are often the largest component of the total loss amount paid to settle employment practices litigation. When faced with the escalating costs of defense, small employers recognize that the EPLI coverage offers real protection for both legal fees and claim settlement costs. Our unbundled coverage options, such as ‘defense costs only’ for wage and hour claims, offer affordable solutions for many smaller employers.”

Ketcham says that the market continues to be soft but “we don’t see rates coming down dramatically although there can be decreases on small, clean risks. More often, we are seeing carriers offer policy enhancements or lower retention options to retain existing accounts or to entice purchasers to move away from a competitor.”

Renee Azelby, assistant branch manager at Jimcor Agencies, notes that the soft market in other lines may present an opportunity for agents to offer EPLI to current clients. “Many agents are starting to use EPLI as a cross-selling tool,” she says. “They see their clients saving money on other product classes, and they are now able to re-introduce this much needed coverage which has often been overlooked. With all the wrongful termination lawsuits and media picking on everything, it is on everyone’s mind, and it is an easier sell than it might have been a couple of years ago to the Main Street client, as well as the larger professional firm.” Talking to the client about EPLI “also could save the agent a possible E&O claim later on,” she adds.

“The marketplace is competitive and there are new players trying to enter,” says Azelby. But any professional liability coverage is an area that requires special expertise, she continues, so agents should deal only with companies that “specialize in EPLI and know the coverage inside and out. It is also important to work with a market that has longstanding relationships with the carriers that write this type of business.”

Upcoming Specialty Lines topics are the Security Industry, including Burglar/Fire Alarm/Safety Equipment Companies, Security Guard Services and Detective Agencies in August; Pay-for-Play in September; and Professional Liability for October.

 

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