Discrimination lawsuits against employers are increasingly common in the modern workplace. The U.S. Equal Employment Opportunity Commission (EEOC)reported 81,055 new workplace discrimination charges in FY 2023, up 10.3% from the previous year. Employers can protect themselves from claims of discrimination with employment practices liability insurance (EPLI), which may be available as an endorsement on a business owner’s policy or as a standalone policy.
What EPLI Insurance Covers
An EPLI policy typically covers the cost of defending against claims as well as settlements or judgments up to the policy limit. This type of insurance protects your company when a current or past employee or job applicant brings a lawsuit alleging discrimination based on a protected characteristic, such as race, age, gender, ethnicity, religion, disability, sexual orientation, pregnancy, or other. The policy also protects against claims of wrongful termination, harassment, failure to promote, retaliation, and many other employment matters. Some EPLI policies also safeguard companies against work-related discrimination or harassment claims brought by non-employees, such as customers or vendors. EPLI policies vary widely; read your policy carefully to understand its protections and limitations.
Exclusions in EPLI Policies
Like all insurance policies, EPLI has exclusions, which can vary from policy to policy. Claims of bodily injury or property damage are almost universally excluded, as these categories are generally covered under commercial general liability (CGL) insurance. EPLI also generally excludes claims arising from fraudulent, dishonest, or criminal acts. Wage-and-hour claims are also excluded in many EPLI policies. And for public policy reasons, EPLI policies often do not cover criminal fines, civil fines, punitive damages, penalties or statutory liquid damages. Note that EPLI policies also exclude claims in which the insured had prior knowledge or should have had prior knowledge of a claim or circumstances that could lead to a claim.
Claim Notification Procedures
It is important to understand what constitutes a claim under your EPLI policy, and that you properly notify your insurance company of the claim in accordance with the policy’s claim notification procedures. For instance, your EPLI policy may require that you provide, timely written notice of any of the following: a lawsuit filed against you in court; a written demand for money damages or other relief, including for arbitration; an administrative charge filed with a governmental agency, such as the EEOC; or an investigation by a governmental agency. Failure to provide timely notice in accordance with your policy can have severe consequences for your company; these may include the insurer being excused from all liability.
Claims-Made Policies
EPLI policies are generally claims-made policies. This means that for coverage to apply, the claim must be made against you, and the insurance company must be notified, during the time period that the policy is in effect. As long as these two things happen during the coverage period it is not necessary for the discrimination itself to have happened during the coverage period. However, as stated earlier, you will not be covered if you knew about, or should have known about, the triggering event prior to taking out the policy. Also, it’s important to note that many claims-made policies have a retroactive date, which limits how far back in the past triggering events could have occurred for there to be coverage.
If you are involved in a dispute with your business insurance company, contact Schwartz, Conroy & Hack. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business.
