By Heather McBroom, Precision Insurance Services
November 18, 2020
All companies with one or more employees, or in the process of hiring, have exposure to Employment Practices claims. With the complexity of the laws and the rapid changes we are currently seeing in response to the pandemic, now it is more important than ever to protect your business! Some examples of the lawsuits you could face include:
- Emotional distress (belittling in front of others)
- Sexual or Workplace Harassment
- Wage Disputes
- Invasion of Privacy
- Defamation of character
- Negligent hiring practices or supervision
- Wrongful termination
You can also be sued by an employee for breach of contract (written or implied) such as employment contracts, evaluations, or oral promises. Additionally, you must be compliant with all statutes (federal, state, and local) regarding employment practices at all times. There are a large number of laws pertaining to employees and hiring – better to insure against the chance that you may miss one of them.
As the pandemic continues to affect small businesses, some of the claims that carriers have received include things like failure to accommodate an employee with their concerns regarding safety in the workplace (requiring customers to adhere to the mask mandate), retaliation for not returning to work when asked (the employee has health concerns), and privacy issues (disclosure of positive COVID test results to other employees).
EPLI policies provide coverage for these claims filed by employees, both current and past, as well as job applicants. It pays for damages the insured becomes legally obligated to pay AND the defense cost of such suits. Coverage does not typically extend to claims against the named insured by a third party, such as customers, vendors, independent contractors, or volunteers, even though the exposure may exist.
EPLI policies vary greatly between carriers so it is important to read the definition of what is a wrongful act, review exclusions listed on the policy, and make sure your limits are adequate for your exposure. While defense coverage is almost always included in the policy, it will be important to know if the defense is included within the limits on the policy or outside the policy limits to determine that your limits are adequate for your organization’s risk. The duty to defend ends when the limits have been exhausted if they are included in the limits and will often times leave you scrambling to hire new counsel to take over in an existing suite. The deductible, or retention, on the policy, is usually higher than that on your other policies as well so make sure you review this figure as well. If your policy includes coinsurance, you will be responsible for a percent of the loss IN EXCESS to your deductible on the policy.
If you do have EPLI coverage currently, make sure you are aware of any policy Conditions including the duty to immediately notify the carrier, IN WRITING, as soon as you are notified of any incidents that may become claims and you may have to provide written consent to the insurance carrier to settle any claim in order for them to defend you. Claims are being denied if you are not compliant with the policy Conditions.
There are also several ways you can be proactive in protection against such claims. One is to stay current on the current COVID mandates and follow them. Second, develop your organization’s plans and protocols to the different levels of directives that can come from the state officials. Establish best practices policies and procedures and train your staff on how to respond to employee concerns and how to be empathetic with customers during this difficult time. And, last but not least, purchase insurance. Most carriers will offer prevention tools and expert advice to mitigate your risk and manage any claims that may arise. We offer a variety of carriers to make sure your policy fits your needs, at affordable pricing! Give our office a call today at 719-210-0121 and talk to one of our trusted insurance advisors.