Although employers can still purchase some amount of employment practices liability coverage through their general liability insurance, or business owner’s policy, it’s time for business owners and employers to take a serious look at employment practices liability insurance (“EPLI”). Anyone who has lived in the United States for the last few years knows that employment practices claims have grown substantially, and can put the very health and survival of a business at risk.
EPLI can cover a vast number of employee claims, for example:
All types of discrimination, whether based on race, ethnicity, sexual orientation, disability, age, etc;
- Sexual harassment
- Discrimination in hiring
- Discrimination in evaluation and promotion
- Wrongful termination
- Wrongful infliction of mental or emotional distress
- Mismanagement of employee benefit plans
- Wrongful discipline
- Certain aspects of wage and hour claims
The variations of coverage under these policies is substantial. Therefore, it is critical for employers to make sure they use a sophisticated insurance broker that understands their business, understands the nature and types of claims that are likely to arise in connection with their particular industry and business, and helps them best tailor the EPLI coverage purchased to fit their needs and budget.
A few other general thoughts about this type of insurance. First, EPLI policies are most often “claims made” policies. That means the claim against the employer needs to be made and the insurance company notified during the time period when the policy is in force, which is generally a one-year term. It’s also important to know what the word “claim“ means in the policy, because it often does not just mean a claim that an employee has actually made, but it can include circumstances that could lead to a claim. Those circumstances also require the insurance company to be notified. For any employers who purchase this coverage, I strongly urge them to make sure the appropriate people in the company know, even if they know nothing else about the coverage under the policy, what the word “claim“ means within the policy, and that they understand what duty they have to notify the insurance company of a claim or a potential claim.
Also, be very careful when filling out the application for insurance because a failure to disclose already existing circumstances that may lead to a claim, or past claims or past potential claims, could lead to a loss of the entire policy. Misrepresentations on the application for the EPLI insurance are a fertile area for insurance companies to investigate when a claim is made. A failure to disclose material facts about prior claims or about potential claims can lead not only to loss of coverage for the claim at hand but a loss of the entire policy. Be thoughtful and be cautious when filling out that application.
If you have any questions or concerns about your coverage or are experiencing difficulty in connection with a claim or potential claim with your insurance company, please do not hesitate to give us a call.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack