When small businesses are in the process of reviewing their directors and officers coverage, workers compensation coverage, professional liability coverages or are simply transitioning from one broker to another that is an excellent time to consider Employment Practices Liability Coverage.
Why consider EPLI There are several key areas of exposure for all employers that are not covered by directors and officers (D&O) insurance. They are also not covered by a company’s commercial general liability policy or any other commercial coverage. Employers are exposed to litigation as a result of the potential to employ, actual employment or termination of employees.
Wrongful Discharge More than any other aspect of the employment relationship, the discharge of an employee has the potential to result in litigation. EPLI policies cover claims by former employees alleging that he or she was wrongfully terminated. Some policies also cover claims of “constructive discharge” by employees who claim that they could no longer tolerate the work environment and were compelled to resign or retire.
Sexual Harrasment Coverage for sexual harassment claims against your company including claims against supervisors and fellow employees can and should be included. The policy can cover all categories of sexual harassment as currently defined by the Equal Employment Opportunity Commission.
Discrimination Policies can also cover claims by current, former or prospective employees who charge that they were the victim of employment-related discrimination. The definition of discrimination is fairly vast and proper coverage should cover as broad a term of discrimination as possible including discrimination on the basis of race, color, creed, national origin, military service, gender, pregnancy, sexual orientation, marital status, age, sex, disability, etc.
Whistleblower Sometimes referred to as ‘Section 132′ claims, coverage can be included for litigation resulting from an employees claim of an adverse employment decision as a result of disclosing an unfair or illegal practice of the employer.
Wage and Hours Claims by an employee for accepting wages and/or hours that fall outside of state and federal requirements may be covered by an EPLI policy but generally only if specified by the insured and acceptance by a carrier.
Other Employment-Related Claims Many or all of the following may be covered in an EPLI policy: Libel, Slander or other defamation, loss of consortium, invasion of privacy, mental anguish, assault, battery, breach of contract; negligent hiring, supervision, retention or promotion with connection to any other employment-reated claims.
What to look for Your coverage should be as broad as possible in regards to claims defined, causes of loss, insured definition and covered wrongful employment practice. When possible negotiate to take out the exclusions relating to other employment practices standards and law namely OSHA, COBRA, ERISA, Pollution exclusion, Fair Labor Standards Act, NLRA. Also important is to get the exclusion for prior acts taken out when possible.
I have witnessed several employers refuse this coverage time and time again. It is right up there with business interruption coverage. Cost vs. benefit is always the reason. For those who have had to pay the cost outright for defense in court, plus suffer judgement by current patrons and clients with their buying decisions the cost of proper coverage vs. paying out of pocket is staggering. If you’re work environment is a constantly changing and dynamic one, particularly with a large number of employees coming and going and your business resides in a state with a litigation history such as Massachusetts the cost vs. benefit is easy to assess.
Scott Graves is passionate about helping business owners. Tune in to his show ’The No Boundaries Radio Hour’ with co-Host Dennis Mannone on the No Boundaries Radio Network. Meet him at the crossroads between strategy and innovation at scott@smgravesassociates.com or twitter @smgcreative.