EPLI: Employment-Related Practices Liability Insurance
The 1990's saw a great Internet boom. There was also an explosion in employment-related claims and lawsuits. Remember the Anita Hill-Clarence Thomas harassment case?
As the claims increased, so did efforts to find coverage for employment-related claims under existing policies. This included CGL. These efforts were not very successful. The insurance industry's answer was to develop Employment Practices Liability Insurance (EPLI). New insurance coverage often encourages more claims. In contrast, EPLI has reduced the number of charges made against employers. This is due to an awareness of employment-related problems and the efforts to control them.
Insurance companies have tried combination policies before. Insurers joined EPLI to Directors and Officers Liability policies. But this did not become the common approach to employers' practices insurance. The trend went to separate policies. This included Employment-Related Practices Liability coverage from ISO. This can be used with your firm's Comprehensive General Liability policy. Endorsements have been offered to add EPLI to certain Business Owners Policies.
If there is a coverage trend today, it leans towards a management liability policy. This includes:
- Directors and Officers coverage
- Professional liability
- Merger & Acquisition coverage
Today you'll either have the ISO coverage form or a separate EPLI policy.
Just What Are Employment-Related Practices?
EPLI covers the following:
- acts of wrongful termination
- negative evaluation
- discrimination based on factors such as sex, race, and religion.
These risks are usually preventable through management risk control efforts. Insurance companies offer risk management help. They can train management and employees to prevent poor employment practices.
* Tip. Compare EPLI policies for inclusion of the employment practices you want covered by insurance. In today's market the available EPLI policies vary widely in the covered practices
An EPLI policy probably will exclude:
- civil or criminal fines
- malicious acts or omissions
- Workers Compensation situations, and
- Americans with Disability Act problems (often).
If ADA problems are covered, the costs of creating proper conditions for the disabled won't be covered.
Unusual Features Of EPLI
Defense costs may or may not be covered by EPLI. The ISO coverage form provides for a Co-Payment feature. This requires the insured to pay a percentage share of defense costs. You can find this feature on the Declaration page. In some policies, the defense costs are included in the policy dollar limits. This reduces the dollars available for claim payments.
* Tip. Defense costs can accumulate quickly. Consider how your policy covers them.
A deductible is a common EPLI feature. Deductibles, co-payments and similar devices encourage employers to work on loss prevention.
Another area of concern is "who is insured." The firm's covered, no question. But the stockholders or the general run of employees? Not as likely. The Directors and Officers policy may cover stockholders. Non-supervisor or manager types are on their own if sued. However, it is possible to cover stockholders and general employees. How? Use an endorsement.
You already know that EPLI policies are "claims made" policies. So pay careful attention to the extended reporting period allowed for reporting claims. A short period can be built into an EPLI policy. You also have the opportunity to buy a longer time period for reporting.
Reduce Those Losses—For Good
We tend to think of insurance in relationship to ourselves and our risk problems. However, insurance also has an impact on society. EPLI has played a significant role in encouraging employers to apply loss prevention to employer practices. These efforts have created an awareness of poor practices. In turn, this has helped reduce claims.
Employment practices' training is available from insurance companies. Don't overlook them! Better employment practices create a better work environment.