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Employment Practices Liability
Frequently Asked Questions |
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Some practical concerns about a much needed coverage from Bailey Special Risks, Inc. |
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Why should I be concerned about the need for EPLI coverage? What does EPLI cover? What is an EEOC charge? Does coverage include payment for the costs of defending these claims?
I've heard about loss control services associated with these policies. What does this mean?
What are hotlines? Don't I receive protection for EPLI claims under my Workers Comp coverage, D&O, or CGL policies?
How can I know a good EPLI policy when I see one? How can I get a price for my coverage? |
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In California:
BSR Insurance Services
CA Lic # 0E72686 |
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Why should I be concerned about the need for EPLI coverage? |
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One of the most significant risks facing American businesses today is the threat of legal action by an employee for a claim of wrongful employment practice. According to one important national data base, the median compensatory award for such claims in the year 2004 was $175,000. In addition, in such cases the defendant is responsible for his own costs of defending the action and in most all cases, the costs associated with the plaintiff's lawyers. Imagine the chagrin and surprise of the employer who discovers that not only must he fork over the judgment rendered against him, but also must pay for the lawyer that sued him. This same data base measured the probability of plaintiff verdicts during 2004 and reports that in 63% of such cases, the plaintiff did win. The EEOC reports in excess of 80,000 charges of discrimination having been filed with it. |
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Applications and forms viewable with Adobe Reader |
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What does EPLI cover? |
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EPLI covers employers as for claims made against them by current, previous, and prospective employees for allegations of failure to hire, demotion, wrongful termination, and other adverse employment actions arising out of discrimination (including sexual harassment) and other violations of state, federal, and local labor laws. In addition, these policies may cover assertions of defamation, invasion of privacy, and other common law torts depending on policy wording. Coverage generally included defense and representation for hearings before authorities such as the EEOC, Department of Labor, and similar bodies. |
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What is an EEOC charge? |
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Under the Civil Rights Act of 1964/1991, a person who experiences discrimination in the workplace must first exhaust their administrative remedies before they can take legal action against the employer. The Equal Employment Opportunity Commission was established by Federal statute to provide among other things, mediation facilities for employees who feel they have been the victim of workplace discrimination. In order to take advantage of this facility, employees (or prospective employees) must first file a formal charge of discrimination with the commission. The commission will then notify the employer of the charge and ask for certain documents that it needs to perform it's investigation. An EEOC charge is considered a claim by most all EPLI policies and should always be reported as a claim! Failure to do so can result in denial of coverage by the insurance carrier.
After the EEOC has done it's investigation, it will issue a finding. If a finding of discrimination occurs, there will be an attempt at mediation of the claim. Whether a finding of discrimination occurs, at some point the EEOC must issue a "Right to Sue" letter if so requested by the charging party which then gives the charging party 90 days to file suit. Failure to file suit within this time frame will generally bar recovery by the charging party. |
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Does coverage include payment of the costs of defending these claims? |
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Yes. Covering the costs of defending these claims is a very important aspect of the coverage. When a claim for wrongful employment practices in made, it involves an area of the law that is highly specialized. Defense costs are generally a part of the limit of liability and serves to reduce the overall limit available for the payment of claims unless the policy is endorsed otherwise. Some but not many policy forms include coverage for defense outside the limit of liability. |
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I've heard about loss control services associated with these policies. What does this mean? |
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Most all insurance carriers offering EPLI coverage provide web based services which can be utilized by the insured for the training of staff members in the avoidance of behavior that can give rise to EPL claims. These services are generally included with the price of the policy but on some occasions may involve an additional charge. The benefits of such services are significant since proper training of employees in anti-harassment practices can be used as a defense for certain types of harassment claims. Insureds would be well advised to always take advantage of loss control services. |
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What are hotlines? |
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Hotlines are services accompanying an employment practices liability policy. A hotline allows insureds to call a human resource professional or employment attorney, sometimes on a 24-hour basis, in the event there is an employment-related event that could affect the coverage provided by the policy. For example, if an insured corporation suddenly decides to close a given manufacturing plant, the insured could call the hotline and receive immediate advice on how to handle the announcement and any problems resulting from it. The intent of hotlines is to provide the insured with expert, instant advice, aimed at reducing the exposure to employment practices liability claims. |
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Don't I receive protection for EPLI claims under my Workers Comp coverage, D&O or CGL policies? |
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With the possible exception of D&O policies, the answer is no. Workers Comp protects the employer for claims by employees arising from bodily injury, disease, disability or death. It does not protect the employer for claims of discrimination, harassment, or violations of similar labor laws. Under certain circumstances, a claim for retaliation arising from a work related injury can be covered by a WC policy. CGL policies now exclude claims arising from employment related practices. D&O policies on privately held companies can cover the business entity for certain employment related practices claims. Directors and Officers can also be protected for such claims subject to the policy terms and conditions. When coverage is provided by a D&O policy, however, the coverage is not generally as broad as is found in a stand alone EPL form, and the self insured retention's or deductibles are usually large. |
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How can I know a good EPLI policy when I see one? |
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- It should cover claims arising from violation of any discrimination law
- It should cover common law torts, sometimes called work place torts on an unnamed peril basis. When torts are named, this leads to the possibility that one might be missed and not present at the time of a claim - much like the writing of unnamed peril forms in property insurance
- Punitive Damages should be covered. Some authorities suggest so called "most favorable venue" wording, however there is an open question about the importance of this since there is little case law upon which to relay as to its value
- If possible, request a form that will cover wage and hour claims under the FLSA, but watch for coinsurance clauses that can greatly impact the amount that could come out of the insured's pocket. Wage and hour coverage is extremely limited and very few carriers will provide it.
- Does the policy define "Employee"? It is probably better if it does not since certain individuals may not normally be though of as employees and thus not be covered by forms that define this term. When employee is not defined, it probably makes it possible to include a wider number of individuals who might bring a claim as claimants who will be covered.
- What risk management services are offered by the carrier? Many now include training courses for supervisors, hotline services for both HR consulting and complaint reporting. These are extremely valuable services that are included with the cost of the insurance policy in many cases.
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How can I get a price for my coverage? |
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If you are an insurance agent, you can log on to the rating engine at www.bsrins.com and rate online from two different insurance carriers. If you do not have a username and password, please contact operations@bsrins.com and request one. If you are a buyer, please contact your local insurance agent and have him or her contact our office. The process is pretty simple, but the risk transferred is often complex. |
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Please remember that each situation is unique. This page is provided for informational purposes only and does not constitute legal advice. Do not hesitate to contact us regarding your particular situation. |
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