Employee Practices Liability Insurance (EPLI)

Why do employers need Employee Practices Liability Insurance (EPLI)?

Employment Practices Liability claims are on the rise, to date approximately 60% of all civil litigation in federal courts is now EPL related. The Equal Employment Opportunity Commission (EEOC) recorded 79,432 charges in 2004, with the average cost of an EEOS lawsuit exceeding $250,000, and the total payout of claims equaled $420,000,000. Insureds experiencing these claims are located all over the United States and operate in many different industries.

These claims examples are a combination of situations where EPLI Carriers are helping its insured defend and resolve actions filed against them as well as claims posted on the EEOC’s website.

Retaliation for Health Department Complaint (“The Set-up”)

A worker is given a “last chance” warning about coming to work late. The disgruntled employee immediately makes a complaint to OSHA about alleged unsafe practices. Then, upon being terminated for coming in late again, alleges he was fired in retaliation for making the complaint to OSHA. This is a classic ‘set-up’ by an employee who knows they are about to be disciplined or terminated for poor work performance.

Sexual Harassment/Sex Discrimination

A manager was accused of providing favorable shifts and stations to those employees who would have sex with him. The matter was settled pre-suit, to avoid any negative publicity, as the employees were threatening to go to the media. The total cost of the claim was $100,000.

The EEOC recently filed a sexual harassment complaint against a franchise alleging that teenage female employees were subjected to sexual harassment by a male assistant manager. Allegedly, he grabbed their breasts, put his hands in their pockets, and rubbed up against them. The suit says that although the employees complained to management about the unlawful conduct, no appropriate action was taken to address and correct the situation.

Another franchise paid $400,000 to settle a sexual harassment claim by seven workers who alleged a manager groped them, made vulgar comments, and made demands for sex. Several girls complained to the assistant manager, but remedial action was not taken.

A national manufacturer paid $360,000 to settle a gender discrimination suit brought by men alleging that they were denied more lucrative positions because of their sex. The company was accused of only hiring women as laborers.

Third Party Claim

Customers have filed class action lawsuits alleging that companies refused service or provided sub-standard service based on the customer’s race, national origin, age or religion. Attorney’s fees defending this type of class action suit will routinely exceed $500,000.

A customer threatens to file a class action alleging that an employer is not ADA compliant, claiming that the handicapped parking spaces are too narrow, or the counters are 2″ too high, or the doors are too heavy, or display racks block the aisles, or the water fountains are too high, or the restrooms are not in exact compliance. The customer and his attorney often settle for a “bargain” of $15,000-$20,000 (knowing that defense cost could reach six-figures for the company) before moving on to the next employer down the block.

All these cases can be very costly and our duty to defend is alleviating our insureds from the significant legal costs associated with defending employment practices liability lawsuits. These insureds are now able to focus on their day-to-day activities and use their money and resources for the good of the company as opposed to defending themselves against an EPL lawsuit.

Policy Form Highlights

  • Broad definition of insured includes full-time, part-time, leased, seasonal, temporary employees, and any independent contractor indemnified by the Insured, as well as the insured entity and any subsidiary (as defined)
  • Broad definition of wrongful employment act includes discrimination, harassment (including sexual), wrongful termination, constructive discharge, wrongful failure to hire, wrongful demotion, retaliation, misrepresentation, infliction of emotional distress, defamation, invasion of privacy, humiliation, wrongful evaluation, and breach of an implied contract
  • Bodily Injury exclusion includes carve out for emotional distress, mental anguish, defamation (including libel and slander), invasion of privacy, or humiliation.
  • Duty to defend policy language
  • Broad definition of claim includes written demand or assertion for monetary or non-monetary relief, including civil, criminal, administrative, or arbitration proceedings
  • Loss includes punitive or exemplary damages up to the limit of liability, where insurable; most favorable jurisdiction language applies
  • Automatic coverage for subsidiaries created or acquired during the policy period whose assets are less than 25% of the insured entity
  • EEOC (or state equivalent) charges are covered
  • No intentional acts exclusion
  • No downsizing exclusion
  • No copyright/patent exclusion
  • Full prior acts coverage
  • 36 month extended reporting period is available if the named insured cancels or if the insurer or named insured refuses to renew *
  • Worldwide coverage
  • No co-insurance
  • Limits of liability up to $5,000,000
  • Deductibles available from $2,500 Specialty Industrial Enhancements
  • Third party liability
  • $100,000 cost of defense for FLSA claims
  • Optional $100,000 sublimit for franchisor if named in a claim along with the named insured
  • Modification of “hammer clause” (75%/25% co-insurance)
  • Spousal coverage