What are the concerns with EPLI policies?
These claims are very intentional in nature as far as the alleged activity. EPLI policies are designed to cover activities such as sexual harassment, retaliation, race or gender discrimination, or hostile work environment. But some states have issues against allowing insurability of intentional acts. If you’re in one of these states, you can use ‘wrap’ policies, often obtained from Bermuda insurance carriers, to provide coverage for punitive damages and intentional acts.
Some also fear that purchasing coverage may make it more likely that employees will bring claims or that the claims will be larger. There is no evidence, however, that this is the case, and in some instances, the presence of an insurance carrier can take the emotion out of the case for plaintiffs and make them realize they are not getting revenge against their employer, they are going to battle with an insurance carrier.
What is the typical cost for EPLI?
It varies widely based on what type of deductible the business is willing to take. And because employee headcount is a big determining factor of cost, it is hard to make any generic statement regarding pricing.
However, premiums have not increased, even in this economy. They’ve stayed flat or decreased, depending on claim history and risk profile. So, business owners might think that the price for EPLI would be too high, but that’s not the case. While larger employers have purchased EPLI for a fairly long time now, it is important for companies with fewer than 5,000 employees to consider purchasing the coverage while pricing remains inexpensive, because smaller companies run a greater risk of exposing their balance sheets to a catastrophic loss from an EPLI claim than large employers and are more likely to get value from the risk management services provided by carriers through the coverage.
What should business owners do if they are hit with an employment practices lawsuit?
Business owners should reach out to their broker if coverage is in place to consult on his or her duties, as far as the policy and claim process. They should also quickly determine the ability to either use a panel of counsel assigned by the insurance company or select their own counsel. It’s critical to get this legal advice immediately, because there’s a brief window of time after receiving a claim where the tiniest mistakes can make a huge difference. For example, a business owner may fail to hit time periods with regard to litigation or take some internal action in relation to the claimant that dramatically increases exposure on the overall claim.
Martha Jacobs is a vice president in the Financial Services Group of Aon Risk Services Central Inc. Reach her at (412) 594-7535 or [email protected].
