Dive Deeper into EPLI
Employment Practices Liability Insurance (EPLI) covers a wide variety of employment related exposures for businesses from 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 they affect your business will help you and your insurance broker craft a custom tailored policy to fit your needs:
EPLI for Staffing Companies
Temporary Staffing companies have a unique set of exposures. It’s essential to make sure the definition of employee extends to temporary/placed employees. Also important is the ability to extend coverage to your clients as co-defendants to cover claims made by a temporary employee for a wrongful act against your client/host employer. Where available, you should also request that the policy be rated on billable hours, rather than head count, for the most competitive rate.
EPLI for PEO’s
PEO’s have their own unique exposures, and 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 that the 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 that you set forth parameters in your client contract as to who pays the deductible in the event of a claim. Many carriers have the ability to “stair step” deductibles for your PEO clients based on their individual size.
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. This is a conversation you want to have with your broker prior to renewal. The carrier will require basic information such as the attorneys name and hourly rates to vet the attorney, and if approved will endorse your policy allowing you to use the pre-approved attorney of your choice.
Wage & Hour
Wage and Hour coverage is available, however, capacity is still limited and the coverage can be somewhat restrictive in scope. The sub-limits offered are generally for defense only and do not include indemnity, and limit are typically in the $50,000 - $500,000 range. Historically, carriers have only provided the coverage to in-house employees, although some carriers will now extend coverage to temporary and PEO employees.
Third Party Coverage
Some policies will allow you extend harassment and discrimination coverage to claims resulting from and made by third parties such as vendors, suppliers, etc. An example of this would be a mail delivery person alleging 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 do not agree, the total claim payment (including defense) can be limited to a certain % of what the claim would have settled for, if you had agreed to it. 150% is a common sublimit. Using this as an example, if your carrier and the claimant agreed to settle a claim at $25,000 and you did not agree to the settlement, the carrier would continue to defend until which time an agreeable settlement was reached, the claim was dismissed, or a judgement was made – or – until their costs reached 150% of the original settlement amount, or $37,500. Defense costs and judgements above this amount would be the sole responsibility of the named insured. Settlement provisions can vary quite a bit depending on the carrier, it’s always a good idea your policy or your broker to determine the exact wording of your policy’s hammer clause.
Our goal is to arm you with a greater understanding of your coverage; but to truly protect organization from EPLI claims you need to go beyond just understanding and purchasing coverage. You must implement written policies and procedures that address the issues of harassment and discrimination, and make sure that all employees receive initial training and adequate ongoing training as to their actions and responsibilities under your employment.
Be sure to join staffing industry specialist Evan Rosen, a principal at the law firm Jackson Lewis, on Tuesday, September 17 as he addresses how to prevent and mitigate these claims. Register here!
- What Staffing Firms Must Know When It Comes to Mitigating EEOC Claims (Webinar)
- 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
- Staffing & PEO Blog
- Staffing & PEO Industry Page
- Staffing & PEO Webinar Replays
- Staffing & PEO Library Resources
ABOUT THE AUTHOR