Employment practice-related claims are costly and claims are rising dramatically in the United States. Employment practices liability insurance (EPLI) covers employers for claims made by employees, former employees, or future employees. It covers a variety of claims for all types of discrimination based on race, ethnicity, sexual orientation, age, or disability. It also includes coverage for wrongful termination, harassment, failure to promote, and, in some cases, wage and hour-related claims.
When a complaint by an employee is made, the most important thing an employer needs to know is whether that complaint is or may be a “claim” as defined by the EPLI policy. If it is or may be a “claim,” the employer must inform the EPLI company–put it on notice. The definitions of what constitutes a “claim” or a “potential claim” are always defined in EPLI policies. Here’s what you should keep in mind about EPLI claims and the notification process.
Who Files a Claim and When it Can Be Filed
Generally, the insured entity, rather than a third-party, must report a claim within the designated reporting period to the insurance company who issued the policy.
EPLI policies are “claims-made,” meaning that coverage is only available for claims made against your company when the policy is in force. This is generally a one-year term. In a claims-made and reported policy, as opposed to just a claims-made policy, your policy will explain whether you must also report the claim to the insurance company during the policy period.
Typically, if the claim wasn’t made during the policy period, it won’t be covered. Therefore, the claim must be made during the policy period and typically reported to the insurance company during or, at times, shortly after the end of the policy period. The duty to notify is not simply part of the insured’s duty to cooperate. It also defines the limits of the insurance company’s obligation to take action in connection with a claim or potential claim.
I strongly urge employers who buy EPLI coverage to make sure the right people in the company are tasked with identifying and reporting EPLI claims and potential claims to the company’s EPLI insurance company.
If you don’t notify the insurance company about a claim or potential claim, the company will not be covered for defense costs or indemnity. New York is a classic example of a state where that occurs, but each state has its own rules. Lawyers should know their state laws concerning the consequences of failing to timely notify the insurance company of a claim or potential claim.
EPLI continues to offer insureds broad coverage, which results in more covered claims. If you need help with your insurance claim, feel free to contact us.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack