Employment Practices Liability Insurance Policies

The explosion of Employment Practices Liability (EPL) lawsuits has generated some interesting developments in the insurance industry. Despite the fact that coverage under existing liability policies was minimal even without specific employment practices exclusions, insurers now commonly exclude this loss exposure from the Commercial General Liability, Umbrella and Workers Compensation policies. The trend toward removing coverage for EPL claims is the direct result of a dramatic increase in the frequency and severity of these claims.

Coverage the policy provides:

• Employment practice lawsuits have become an accepted component of the American workplace environment.  Employment practice liability claims typically arise from one (or a combination) of the following five broad categories of conduct: discrimination, wrongful termination, sexual harassment, retaliation, and workplace torts, examples of which include, but are not limited to, invasion of privacy and defamation.   Employment practices claims now represent a significant financial exposure for American businesses.

Losses covered:

• As a result of this growing EPL claim trend, the insurance industry has developed EPLI policies to help protect businesses from these types of losses. However, since most EPLI coverage is written on nonstandard forms, EPLI policies will vary from one company form to the next. Some of the differences are fairly insignificant, while others will result in substantial variations in coverage. The forms also will contain many common features that allow some general observations to be made regarding the scope of coverage.

Important points to discuss with your agent:

• There are several key coverage issues to address when purchasing EPLI, including: covered organizations, persons and employees, covered acts, covered damages, coverage trigger, defense cost provisions, key exclusions

• It is highly recommended that a business secure some EPL coverage protection.  However, before purchasing any EPL coverage, one should consider these key coverage issues when making their decision instead of basing it on the lowest premium cost.  

• Another method to consider is to package the EPLI, Directors and Officers and the Fiduciary Liability coverage together in one policy.  By packaging these coverage’s together and making them subject to a single aggregate limit of liability, insurers can offer the group for a much lower premium than could be charged for three stand alone policies.