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Employment Practices Liability Insurance–First and/or Third-Party Coverage?

Employment Practices Liability Insurance, often referred to as EPLI, offers protection for businesses for wrongful acts and allegations regarding employment and inappropriate workplace conduct. The number of lawsuits filed by employees against their employers continues to rise nationwide. While many suits are filed against larger corporations, no company is immune to employment related lawsuits.

Recognizing that all companies need this kind of protection, many insurers provide some EPLI coverage as an endorsement to their Businessowners Policy (BOP). There are also competitive stand-alone products available through a variety of carriers.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

  • Sexual harassment
  • Discrimination
  • Wrongful termination
  • Retaliation
  • Breach of employment contract
  • Negligent evaluation
  • Failure to employ or promote
  • Wrongful discipline
  • Deprivation of career opportunity
  • Wrongful infliction of emotional distress

The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors including policies and procedures in place and prior claims activity.

An Employment Practices Liability Insurance policy covers legal costs and judgments.  Defense costs can grow quickly, usually ranging from $10,000-$300,000.  It is important to note that defense expense will be incurred even if the claims are found to be groundless.  In addition, resolutions through the court system can take up to 24 months on average.

To prevent employment related allegations, it is important to educate all managers, supervisors, and employees.

  • Create effective hiring and screening programs.
  • Establish and post corporate policies including an employee handbook, job descriptions and use of performance reviews and job applications.
  • Train managers, supervisors and employees on protocols including what steps to take in the event of an allegation.
  • Document everything that occurs, and the steps taken to prevent and resolve employee disputes.

Not all policies are created equally.  There is no standard EPLI policy form – each carrier offers their unique policy wording for Employment Practices Liability.  Thus, it is critically important that you work with a specialist who can guide you through the myriad of options that are available.

If you currently have EPLI coverage, is it the broadest form available?  Are there extensions of coverage providing coverage for both first and third-party claims? A robust Employment Practices policy should offer coverage for your current, past and potential employees as well as customers/patients, vendors, or business associates for allegations of harassment or discrimination. Some extensions of coverage may limit protection to just your employees’ claims, not third parties.  In addition, there are enhancements available for important coverages including workplace violence sublimits, punitive damages and prior acts coverage just to name a few.

Consider this scenario: An emergency medicine group lost some hospital contracts whereby necessitating the group to reduce staff. While they used their HR process (including evaluations of past performance reviews) to identify who would be laid off, an employee filed a claim for discrimination (age) and wrongful termination. While it was settled out of court for an undisclosed amount, the group incurred substantial legal fees to answer the allegations, as well as paying “out of pocket” for the settlement since they did not have the proper coverage in place.

Sentinel Risk Advisors, the Carolinas’ premier, independently owned risk management and insurance brokerage firm can review your current policies and exposures to develop custom-tailored solutions.  Contact your Sentinel advisor today to schedule an appointment.

 

Mike Tekely

Mike Tekely’s previous experience with specialty carriers, brokers and health systems provides a unique perspective in his role as Director of Healthcare Practice for Sentinel Risk Advisors. Utilizing the skills gleaned from his diverse background, he is a champion for practices across the state. Mike has over 25 years of risk management expertise and brings a wealth of knowledge to physicians, dentists and medical groups. He has been recognized as an industry leader with an extraordinary commitment to state medical associations, students and health practices.  He can be reached at mtekely@sentinelra.com or 336-309-4452.