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EMPLOYMENT PRACTICES LIABILITY
Employment Practices Liability is a relatively new insurance product that was created in response to the needs of employers to control the growing frequency and severity of employment-related lawsuits in the early 1990’s.
Coverage for employment allegations generally allege intentional acts as well as bodily or personal injury to an employee – which were not covered under other policies such as CGL, D & O or worker’s compensation.
New and numerous laws protecting worker’s rights on a federal, state and local level made compliance with such laws increasingly difficult for both large and small employers. By 1998, the number of lawsuits filed in federal courts alleging civil rights violations was 42,000 and more than half of those were employment discrimination lawsuits against private employers.
Current policies in the marketplace provide coverage for a wide description of allegations including Discrimination, Wrongful Termination, Harassment,
Negligent Hiring, Retaliation, Wrongful Discipline, Employment-Related Emotional Distress, Mental Injury and Mental Anguish, Wrongful Demotion, Wrongful Deprivation of Career Opportunity and Failure to Enforce Adequate or Consistent Employment Policies or Producers. The majority of products available cover claims for civil judicial proceedings, arbitration and administrative proceedings such as proceedings before the EEOC (Equal Employment Opportunity Commission) or a state equivalent agency.
There are limitations in coverage such as exclusions for claims arising from the Fair Labor Standards Act, the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Consolidated Omnibus Budget Reconciliation Act of l985, the Employee Retirement Income Security Act, the Occupational Safety and Health Act, downsizing, layoffs, workforce restructuring, plant closures or strikes.
Employment Practices Liability can be obtained by private companies on a stand-alone policy, or combined in a Professional Lines package policy with other coverages such as Directors and Officers Liability and Fiduciary Liability. Limits of liability can be separate or combined. Not-for-profit firms usually obtain coverage as part of their Directors and Officers Liability policy. Due to the heightened exposure to securities claims by publicly-traded companies, it is a typical risk management practice to separate the Directors and Officers Liability coverage and the Employment Practices Liability coverage. This prevents the limits under the D & O policy from being depleted by an unanticipated, large class action EPL claim; and prevents the limits for EPL claims from being depleted or exhausted by a major securities claim under the D & O policy.
Because of the increased number of insurance carriers willing to provide EPL coverage in today’s marketplace, that have suitable human resources practices in place, should be able to secure this valuable coverage.
EMPLOYMENT PRACTICES LIABILITY CLAIMS EXAMPLES
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