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POTENTIAL EPL EXPOSURES

While most litigation is filed against larger corporations, no company is immune. Small companies and their larger counterparts would be wise to consider obtaining Employment Practices Liability Insurance (EPLI) to provide coverage against claims that the legal rights of employees have been violated. Today's workplace offers a variety of employment practice risks, including alleged wrongful termination, sexual harassment, and infringement of Title VII of the Civil Rights Act of 1964 which broadly applies to various forms of discrimination based on race, gender, age, and disability. However, employees are not the only potential plaintiffs; a growing number of lawsuits are being filed against employers by third parties alleging violation of Title III of the Americans with Disabilities Act (ADA) over the accessibility of business websites for visually or hearing-impaired users.³

The U.S. Equal Employment Opportunity Commission’s (EEOC) 2019 report detailed that 72,675 charges of workplace discrimination were filed in 2019. Of those charges, retaliation was the most frequently filed, followed by discrimination based on disability, race, and sex. The EEOC also received more than 7,500 sexual harassment charges, highlighting the fact that sexual harassment in the workplace is another area where charges have risen.^2,4 Other emerging sources of EPL claims relate to discrimination against transgender employees, businesses exercising religious objections, pay gaps based on gender, and the inability of gig economy employees to claim independent contractor status.⁴ If an employment lawsuit based on such a charge is filed in federal court, there is a 16% chance that the employee will be awarded more than $1 million and an almost 70% likelihood that the plaintiff will win at least $165,000.⁵ In this environment, it’s important that businesses take advantage of EPLI coverage to help protect against the impact of such claims.

The coronavirus pandemic of 2020 has also created an environment prone to greater EPL risks. Some may experience new exposure around employee refusal to return to work because of safety concerns. This issue as well as wider economic and operational impacts are leading to an increase in wrongful termination claims, especially in relation to layoffs and furloughs. EPL claims stemming from COVID-19 may focus on a broad range of employment practices, from alleging that employers didn’t take appropriate action to mitigate health and safety risks for employees to claiming alleged discrimination based on coronavirus concerns.⁷ While the consequences of the pandemic are requiring many companies to look for cost savings, it’s important to maintain EPLI coverage and consult with legal counsel prior to instituting layoffs, terminations, or furloughs in order to help prevent the potentially devastating consequences of an EPL claim.

BENEFITS OF EPLI COVERAGE

Some may argue that paying for EPLI coverage is counterintuitive because employment discrimination is usually viewed as an intentional act, and insurance doesn’t cover intentional acts. However, in reality, EPL coverage simply reflects the fact that any employer is at risk for employee claims in our legal system. Fortunately, these risks can be quantified and underwritten in order to help protect small and mid-size companies against catastrophic consequences.⁶

The cost of obtaining EPLI coverage depends on the type of business, number of employees, and various other risk factors, including any past history of litigation due to employment practices. Generally, EPL policies reimburse the insured against the costs of litigation as well as the cost of judgments and settlements. Policies typically don’t cover punitive damages, civil/criminal fines, or liabilities covered by other policies such as bodily injury, property damage claims, or Workers Compensation.¹

BOTTOM LINE

Companies can do everything right when it comes to best employment practices and policies, but that doesn’t stop employees from filing lawsuits. And the cost of defending and paying those claims can be devastating. Defending a single workplace discrimination claim can cost more than $100,000, which is no small sum. In contrast to a larger company, an adverse verdict with a 6 or 7-figure bill could easily bankrupt a small business, or result in serious setbacks.⁶ In light of today’s increasingly litigious environment, businesses would be smart to protect themselves and take another look at their ELP insurance needs. Retail agents can assist insureds by discussing likely EPL exposures and assessing specific coverage needs in partnership with a trusted wholesale specialist well-versed in obtaining broad EPL coverage in the current marketplace. Agents should contact their CRC Group producer to learn more about how we can help protect businesses when it comes to employment practice exposures.

Contributors

• Allyson Benda is a Vice President, Senior Broker in CRC’s Nashville office and member of the ExecPro Practice Advisory Committee.

ENDNOTES

1. What is Employment Practices Liability Insurance (EPLI)?, Insurance Information Institute, https://www.iii.org/article/what-employment-practices-liability-insurance-epli
2. EEOC Releases Fiscal Year 2019 Enforcement and Litigation Data, U.S. Equal Employment Opportunity Commission, January 24, 2020. https://www.eeoc.gov/newsroom/eeoc-releases-fiscal-year-2019-enforcement-and-litigation-data
3. Number Of Federal Website Accessibility Lawsuits Nearly Triple, Exceeding 2250 In 2018, Seyfarth Shaw LLP, January 31, 2019. https://www.seyfarth.com/news-insights/number-of-federal-website-accessibility-lawsuits-nearly-triple-exceeding-2250-in-2018.html
4. Employment Practices – Liability Claims in 2020, Insurance Journal, January 13, 2020. https://www.insurancejournal.com/magazines/mag-features/2020/01/13/554430.htm
5. The Cost of Employment Lawsuits and How to Avoid Them, Smart Business, September 1, 2017. https://www.sbnonline.com/article/the-cost-of-employment-lawsuits-and-how-to-avoid-them/
6. Understanding the Benefits of Employment Practices Liability Insurance (EPLI), ADP, https://www.adp.com/-/media/TotalSource/pdf/6_BL%20Vol%2022_EPLI%20Article.ashx
7. COVID-19 Raises Various Employment Practices Liability Insurance Considerations, Jones Day Insights, September 2020. https://www.jonesday.com/en/insights/2020/09/covid19-raises-various-employment-practices-liability-insurance-considerations