Employment Practices Liability: Coverage Expands as Claims Increase
Pelland, Dave, Risk Management
In this issue, we've examined a number of strategies being adopted by organizations seeking to reduce their expenses. Of course, good risk management practices can provide the most effective cost-reduction approach by helping an organization avoid lawsuits in the first place.
That's the most common approach to employment practices liability, one of the fastest growing exposures organizations face. Along with rising demand for risk assessments and assistance in avoiding job discrimination, sexual harassment and wrongful termination complaints, additional insurance capacity has been made available this year to help organizations concerned about the number and amount of employment-related jury awards and settlements.
"Companies are generally more interested in the loss control aspects than in purchasing insurance," says Karen P. Gordon, senior vice president of Sedgwick Financial Risk Specialists in New York. "There are more insurance companies offering employment practices policies, but we're seeing more requests for human resource audits, risk assessments and other efforts by companies to protect themselves."
There's little doubt that employment-related exposures are growing. In April, the U.S. Supreme Court ruled in an age-discrimination lawsuit that employers who fire workers over the age of 40 and replace them with younger workers-even if the replacements are older than 40 themselves - may violate the federal Age Discrimination in Employment Act. A month earlier, the U.S. District Court for the Northern District of illinois ruled that supervisors at a hospital can be held personally liable for violating the Family and Medical Leave Act of 1993. And companies that release employees during a downsizing can virtually guarantee wrongful termination suits.
In response to this climate, Ms. Gordon says more organizations are creating employee training programs about ways to improve human resource management practices and to respond to problems more effectively.
"Companies are seeing employment-related claims in the news, and they're experiencing it themselves," she says. "In the past, if there was an employee who was not performing, there may not have been documentation. Problems were often addressed by oral reprimands. Now companies are training their managers how to perform and document evaluations effectively, and they're looking for other gaps in procedures. if they see that certain areas are causing problems, they try to find out why."
And if they're interested in using employment practices liability insurance (EPLI) to fill their gaps, they have more policies and higher limits to choose from. …