Employment Practices Liability Q&A

What does EPL cover?
Discrimination in hiring, firing and promotions, harassment for both sexual and non-sexual acts, inappropriate employment conduct, personal injury such as emotional distress, mental anguish and humiliation, and retaliation.
Who can bring a claim?
Past, present or prospective employees, as well as leased employees, temporary hires, sub-contractors, clients and vendors.
Who can a claim be brought against?
The company, members of the management team, supervisors and/or another employee.
We’ve never been accused of discrimination or harassment. Why does our company need EPL coverage?
Most companies and people do not knowingly discriminate or condone harassment. However, you can do everything right and still be sued. With employment and harassment laws changing frequently, EPL insurance protects you against claims resulting from failure to promote and/or failure to hire. A claim might cite discrimination, but the allegation will be negligence.
How much money might I have to pay to a victorious claimant?
If the case goes to trial, you can expect defense costs to exceed $100,000. Even if you do not go to trial, average defense costs average $45,000.
What is paid for by an EPL policy?
Investigation of a claim, defense, judgment or settlement, and punitive damages where insurable.
How much will my policy pay?
Up to the coverage amount purchased, including defense costs for the entire policy period regardless of the number of claims.
Why are defense and limits of liability important if insurance already covers defense costs?
Here is an example: a policy that offers one million dollars of coverage is purchased. That dollar amount is the maximum the policy will pay for all claims, including both defense and judgments. In many cases, defense costs alone can exceed judgments. So it is valuable to have defense coverage that is additional or outside the limit of liability.
Are deductibles always my responsibility?
Yes, but our policies reduce your deductibles by 50 percent in the event of a wrongful termination claim. In order for this to apply, you must follow the advice of an attorney approved by us prior to the termination.
The insurance company has to defend me, right?
Yes, if the policy is written on a duty-to-defend basis. If not, you must make arrangements to find an attorney and manage the litigation yourself. Most EPL policies can feature a duty-to-defend option.
What if I have an excellent attorney?
You are free to use your attorney if you choose as long as you get the consent of the insurance company first. The attorney must be qualified to handle such matters.
If we have no previous claims, can we use prior acts exclusion?
Here is an example: you have to lay someone off. The layoff was prior to purchasing an EPL policy, but the former employee sues you after it’s purchased. The claim might be excluded if you had knowledge of certain business issues. More often than not, you don’t know the current situation of former employees so we recommend prior acts coverage in most cases.
I’ve heard to prove discrimination in court, the act has to be intentional. If that’s true, what is the purpose of an intentional act exclusion?
This is true, but a number of EPL policies contain intentional acts exclusion and for good reason. It’s easy to define terms on paper, but it’s trickier in a court. Defining intentional acts is the responsibility of the judge and jury. The bottom line is that discrimination without intent is possible. Here is an example: you terminate a 63 year old employee for solid cause, yet they sue for age discrimination.
If an employee claims I sought revenge for one of their previous actions, will my EPL policy cover me?
Yes and some policies even have retaliatory acts exclusion. Also, don’t forget that we can design a policy to cover your specific needs.
How do you handle the fact that not all states permit carriers to pay punitive damages?
It is true that many states do not permit insurance companies to pay punitive damages. However, when determining if we can legally offer coverage, we use the individual state jurisdiction law. We consider where the event took place and/or the principal location of your company (typically whichever is most favorable to the payment of punitive damages), as well as where the damages were awarded.
What is and do I need third-party liability?
Third-party liability covers claims brought by non-employees such as customers and vendors who feel discriminated against. Since most every firm has these types of business relationships, there a real need for this kind of coverage.
Are new employees covered automatically?
Yes, new employees are covered from the moment they are hired.
If I terminate an employee and they threaten to sue, what should I do?
Report the threat immediately. As long as it is a covered claim and you reported it properly, the policy will cover the situation.
Can you help improve our employee relationships?
We offer labor law reviews at no additional cost to you. The review is conducted by a national law firm and is ideal for most medium sized companies.
When should I report a claim?
We recommend reporting a claim as soon as possible. Even if there is not an actual claim, it is beneficial to report any occurrence to your underwriter. However, you are only required to report a claim before the policy expires. So if the expiration is January 1st, you can file a claim on December 31st.