Employment Practices Liability Insurance-Is It for You?

Article excerpt

Nowadays an uncouth joke or a condescending gesture in the workplace can translate into a lawsuit. Discrimination and various harassment lawsuits are very real corporate risks, and companies need to know how to protect themselves should a situation arise.

A new insurance product has been introduced to do just that. Employment Practices Liability Insurance (E.P.L.I.) policies will cover claims brought against the insured employer, its subsidiaries, and affiliated entities, including its directors, officers, and employees. Policies vary and the broadest definition covers full-time/part-time, temporary, and seasonal employees.

A typical E.P.L.I. policy covers the following types of alleged wrongful acts: discrimination; sexual harassment; wrongful discharge; breach of employment contract; violation of various stare laws including defamation; invasion of privacy; intentional infliction of emotional distress; failure to promote; wrongful discipline; failure to grant tenure; retaliation; and various claims of negligent supervision or management.

Awareness Prompts Action

The development of E.P.L.I. stems from many activities concerning employment. First, the public labor force is more aware of its rights in relation to sexual harassment, discrimination, and wrongful termination. This awareness has increased the employee--related claims against employers from both former and current employees.

The labor force also is becoming more educated and is less likely to let what it views as injustices slide. In particular, women no longer feel the need to put up with sexual innuendo or unfair practices, which has led to more litigious activity.

Secondly, the 1991 amendment to Title VII of the Civil Rights Act and other state and federal laws covering the employer/employee relationship, now allow the right to a jury trial and punitive damages. Courts are beginning to rule in favor of employees, awarding large punitive damage fees. Employers can find themselves in a lawsuit over unfair practices that can knock out their company's entire assets.

Also the hiring, disciplining, and termination policies of employees gained new interest, forcing employers to re-evaluate their employment practices. To avoid claims and liability, a employer must implement proactive and preventive steps to safeguard itself.

Study Your Policy

The exclusions will vary including OSHA violations, ERISA violations, illegal conduct, fraud, conduct not arising out of the scope of the employment relationship, bodily injury, wage and hour violations, reasonable accommodation of the disabled employee, and National Labor Relations Board, WARN Act (Worker Adjustment and Retraining Notification Act of 1988) and COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986) violations.

Punitive damages might be covered, but not all states will allow companies to insure against punitive damages. Also E.P.L.I. policies may or may not cover prior acts, which are violations that occurred before the beginning date of your policy. It is recommended that managers purchase only policies with prior-act coverage. Check within your state for statutes that dictate known time limits to bring suit.

Some states have had E. …