More than 50 “markets” offer Employment Practices Liability insurance (EPLI), either through stand-alone policies or as an addendum to a Directors & Officers policy.
Here are some trends to look for when reviewing your coverage:
- “All-inclusive wording.” When the first policies were created, they defined the coverages. Now they do just the opposite — they say that they cover all claims except for those explicitly excluded.
- Due to the softening insurance market, prices for EPL coverage are more competitive than ever. The industry is focusing on companies with 500 or less employees. Even if you have fewer than 10 employees, you should consider this coverage.
- Policies are allowing insureds to select their own counsel as long as they meet certain criteria. Negotiate this provision when you’re buying the policy.
- “Prior acts” coverage increasingly is becoming available due to the “continuing harm” nature of many employment practices claims.
- A handful of policies have begun offering wage and hour defense coverage.
- Many carriers provide “worldwide” coverage. This is helpful to companies with operations abroad.
- A few carriers are offering “soft hammer” coverage. For example, if you have $1 million in coverage, but a settlement offer is made at $100,000, the company can usually force you into accepting this settlement, with you paying any expenses above this cap if you don’t. With a soft hammer clause, the company will negotiate and apportion any additional potential liability.
- EPLI carriers remain concerned about “red zones,” including companies in California, large employers, retail operations, restaurants, law firms, auto dealers, and others.
- No reduction in coverage for defense costs. For example, if you have a $1 million policy and it costs $200,000 to defend the claim, the company will not deduct the $200,000 from the $1 million limit for possible future claims.
- EPL carriers continue to limit coverage for reductions in force, mergers and acquisitions. With a downsizing economy, they’re very concerned about age discrimination and class action claims that are related to downsizing.
In conclusion, we believe your company should not be without EPLI coverage. Contact your insurance broker to learn which coverage works best for you.