Dive Deeper into EPLI
Employment Practices Liability Insurance (EPLI) covers a wide variety of employment-related exposures from the Equal Employment Opportunity Commission (EEOC) and discrimination claims to sexual harassment and more. Below we explore a few key coverage components in greater detail. Understanding these coverage offerings and knowing how it impacts your business will help you and your insurance broker craft a custom-tailored policy to fit your needs.
EPLI for Staffing Companies
It’s essential to make sure the definition of “employee” extends to temporary/placed employees in your EPLI policy. The ability to extend coverage to your clients as co-defendants is important in the event a claim is made by a temporary employee for a wrongful act against the client/host employer. Where available, you should also request the policy be rated on billable hours, rather than head count, for the most competitive rate.
EPLI for PEOs
It’s important to make sure the definition of “employee” extends to leased employees that you provide to others under a contract. Coverage should also be provided to your client companies, to the extent claims arise out of the client company’s wrongful acts against your co-employees, or the co-employees acts while in the service of your client. It’s important to set forth parameters in your client contract as to who will pay the deductible in the event of a claim. Many carriers can “stair step” deductibles for your PEO clients based on their individual sizes.
Choice of Counsel
Under a typical arrangement, the insurance carrier relies on a panel of qualified employment attorneys to provide defense in the event of a claim. Some carriers, however, will allow an insured to designate their own employment attorney, in lieu of the panel approach, which is a conversation you want to have with your broker prior to renewal. The carrier will require basic information such as the attorney’s name and hourly rates, and if approved, the carrier will endorse your policy which will allow you to use the pre-approved attorney of your choice.
Wage & Hour
There are carriers that have started writing wage and hour coverage, but it’s still quite restrictive in scope (coverage extends to in-house employees only with no coverage for temps) and remains cost-prohibitive for most. More and more carriers, however, are willing to build in a defense only sub-limit that provides defense for covered wage and hour claims. Generally, these sub-limits are in the $50,000 - $100,000 average price range.
Third Party Coverage
Some policies will allow you to extend harassment and discrimination coverage pertaining to claims made by third parties such as vendors, suppliers and so forth; for instance, when a mail delivery person alleges harassment by one of your employees.
All EPLI policies contain a settlement provision commonly referred to as the “hammer clause.” In a typical policy, the insurance carrier needs your permission to settle a claim. This provision states that should your insurance company and the claimant both agree to settle the claim, but you don’t agree, the total claim payment (including defense) can be limited to a certain percentage of what the claim would’ve settled for, if you had agreed to it. 150% is a common sublimit.
For instance, if your carrier and the claimant agree to settle a claim at $25,000, and you don’t agree to the settlement, the carrier would continue to defend until an agreeable settlement is reached, the claim is dismissed, a judgement is made or until their costs reached 150% of the original settlement amount. Defense costs and judgements higher than this amount would be the insured’s responsibility. Settlement provisions can vary quite a bit depending on the carrier, so it’s always a good idea to have your broker help determine the exact wording for the policy’s hammer clause.
To truly protect your organization from EPLI claims, you need to go beyond merely understanding and purchasing coverage. You must implement written policies and procedures that address the issues of harassment and discrimination, and make sure all employees receive initial training as well as adequate ongoing training pertaining to their actions and responsibilities under your employment. For assistance, contact a member of the ‘A’ Team.
- Worst Case Scenario Savior: EPLI
- Do I Really Need EPLI?
- Game of Tic Tac Toe: Employment Practices Liability
- Dissecting the Uptick in Wage & Hour Claims
- Mitigating Exposure to Wage & Hour Claims
- Liability E-Book
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