| EPLI Coverage |
| Written by Aaron Adam | |
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Wrongful terminations claims are increasing as more employees dissatisfied with the terms of their firing or dismissal are choosing to take the matter up with their former employers in court. As more and more workers are laid off or terminated because of the current poor economic environment, these lawsuits are expected to increase.
Employment practices liability insurance provides companies with coverage for claims that may arise as a result of a company's employment practices. According to industry experts, the chance of a business facing an employment claim is much greater than that of it facing a general liability claim. These claims can be costly. The average out-of-court settlement for an employment practices case is about $40,000. If the case goes to court, the average award is $218,000, and nearly 10 percent of these cases can result in an award of more than $1 million. Legal fees are also quite expensive in these cases. The average cost of defending a wrongful termination or employment case is about $45,000. With the potential for big losses that employment-related suits pose, it's no surprise that more and more employers are purchasing EPLI policies. What it coversAn employment practices liability insurance policy will cover judgments, settlements and defense expenses related to employment related suits as defined by the policy. In general, EPLI policies cover claims for:Wrongful termination -- Perhaps the most commonly litigated employment dispute, wrongful termination involves the unjust firing of an employee. This also includes "constructive discharge," which is basically the creation of a hostile work environment by the employer to induce an employee to quit or retire. Discrimination -- These suits involve employment-related discrimination committed by the employer based on race, sexual orientation, color, creed, marital status, sex, age, disability, pregnancy, or other status protected by federal civil rights law. This also includes claims involving retaliation regarding an employee's exercise of his or her rights regarding worker's comp or COBRA benefits. These types of claims have increased in recent years, tripling between 1990 and 1998. Sexual harassment -- As the name suggests, this involves claims of sexual harassment as that concept is defined under the Equal Employment Opportunity Commission, including claims made against fellow employees and supervisors. Whistleblower retaliation -- These claims involve employees who allege they were retaliated against because they reported an illegal or unethical practice by an employer. Wage and hour disputes -- These claims regard employee actions involving employer violation of federal laws regarding minimum wage and overtime. Other employment claims -- This covers claims such as libel, slander and defamation, as well as invasion of privacy, emotional distress, assault, battery, negligent hiring, supervision, promotion etc. EPLI policies generally operate under a claims made basis. This means that a claim is covered under an EPLI policy only if the incident related to the claim happens during the policy's period of coverage, and only if the claim is made during the period. What it doesn't coverMost, if not all, EPLI policies have a list of exclusions specifying what the policies won't cover. These usually include risks covered by other types of policies. For example, most EPLI policies don't offer coverage for bodily injury or property damage because these claims are covered by commercial general liability policies.Other policy exclusions include bans on coverage for intentional conduct, such as assault or battery or criminal conduct. EPLI policies also frequently exclude coverage for punitive damages and fines or penalties. Also, many EPLI policies include hammer clauses. These clauses give the insurer the right to tell the insured that it should allow the insurer to settle the case for a specified amount. If the insured bucks this advice, goes to court and loses, the insurer is off the hook for having to pay Recent trendsAs society has grown more litigious, the cost of EPLI policies have gone up as insurers are having to defend their insureds more often and as they are more frequently having to pay out claims.Recent big awards such as a $5 billion claim in an employment suit against Microsoft and a $192 million settlement in a case against Coca Cola have caused trial lawyers to swarm to these types of cases, clogging court dockets with a legion of employment cases. Many insurers now say that they're losing money on EPLI policies and are seeking to remedy this situation. The insurers are lowering policy limits, jacking up premiums and have implemented a more stringent underwriting process to stem their losses. |
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