2 Did you know …An employer is more likely to have an EPL Claim than a General Liability or Property loss.Fewer than 25% of employers currently carry EPL.There are over 25 million small businesses in the US with under 500 employees and not publicly traded (Source: )Three out of five employers are sued by former employees every year (Source: Society of Human Resource Managers)General Liability policies do not cover EPL or can be endorsed with watered-down coverage at low limits.
3 MYTHS OF EPLMYTH #1EPL was created by the Insurance Companies to create new premium sources.MYTH #2The exposure is no higher today than it was in the past.MYTH #3Employees are already protected under other insurance policies.MYTH #4Internal Risk Management is adequate to protect my business.MYTH #5EPL premiums are too high and the underwriting process too time consuming.
4 EEOC INVESTIGATIONS What An Employer Should Know The average time it takes to process an EEOC investigation is …229 days(longer if there is a delay in responding to information requests) to get a determination.Think of the defense costs as well as the cost of the time of the people involved!!
5 EPL CLAIM TRENDSOver 40% of EPL claims are brought against private employers with under 100 employees (Source: SHRM)Most litigious states: CA, NJ, IL, TX, FL and NY. (Source: Insurance Journal)Employment practices liability claims represent 30% of all civil litigation in the United States today. (Source: Bickmore Risk Services)550 EPL lawsuits are filed every day (Source: Insurance Journal)67% of discrimination cases settled by jury verdict are in the plaintiff’s favorThe average cost to defend an EPL claim is $150,000. (Source: Insurance Journal)The median jury award is $250,000 plus 19% of all cases had punitive damages assessed.Median punitive award = $259,000 (
6 EXPOSURES - FEDERAL LAWS Fair Labor Standards Act of 1938 (FLSA)Administered by the Department of Labor’s Wage and Hour DivisionEqual Pay Act of 1963 (EPA)Title VII to the Civil Rights Act of 1964Executive Order of 1965Age Discrimination in Employment Act of 1967 (ADEA)Americans with Disabilities Act of 1990 (ADA)Americans with Disabilities Act Amendments Act of 2008 (ADAAA)Family and Medical Leave Act of 1993Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)Employment Non-Discrimination Act (proposed) – 2007 (ENDA)Genetic Information Non-Discrimination Act of 2008 (GINA)
7 EXPOSURES - FEDERAL LAWS The BIG ONE for Employment Practices insurers …Civil Rights Act of 1991Amended Title VIIAllows for …a jury trialpunitive damagesdamages for mental anguish and emotional distressIn 1992, the first stand-alone EPL policieshit the marketplace.
8 EPL COVERAGE FEATURES Covered Perils DiscriminationHarassmentWrongful TerminationRetaliationExpanded Definitions of “Wrongful Employment Act” generally all revolve around these four perilsViolations of FLSA, FMLA and USERRA and similar federal, state and local statutes8
9 EPL COVERAGE FEATURES Definition of “Insured” The OrganizationIts subsidiaries“any entity which, on or before the date of the inception of this Policy, is more than 50% owned by the Parent Organization, either directly or indirectly through one or more of its Subsidiaries”Automatic coverage for acquisitions –up to 25% of employee count at policy inceptionAffiliates? Joint ventures?Employees – full time, part time, temporary, seasonalLeased employeesIndependent contractors/1099 employees
10 EPL COVERAGE FEATURES Definition of “Claim” Written demandAn oral threat leads to a “notice of circumstance”Demand for monetary damages or non-monetary reliefCivil proceedingsArbitration proceedings but not any labor or grievance arbitration under a collective bargaining agreementAdministrative or regulatory proceedings with the EEOC or similar federal, state or local agencyOffice of Federal Contract Compliance Programs (OFCCP) – audit, Notice of Violation, Order to Show Cause
11 EPL COVERAGE FEATURES Fair Labor Standards Act (FLSA) $100,000 sub-limit for defense costs and lossDefense Costs Outside the Limit of Liability$500,000 limit or more; under 200 employeesDuty to DefendPanel counsel requirement100% allocation of defense costsConsent to Settlement Provision – “75/25 Hammer Clause”Third Party Discrimination and Harassment – 10% additional premiumFull Prior ActsPunitive Damages where insurable – “most favorable venue”Extended Reporting Period (ERP): year options built inNotice of Claim or Circumstance as soon as practicable but no later than 60 days after expiration of the policyNon-cancelable by the insurer, except for non-payment of premiumThree year installment option available on most accounts
12 EPL COVERAGE FEATURES Common Exclusions Bodily injury/property damageCoverage “carve back” for mental anguish, emotional distress, libel, slander, defamation, humiliation and invasion of privacy resulting from a “Wrongful Employment Act”Fraud or dishonesty – except for vicarious liability of the entityERISA-related claims – except for RetaliationStatutory obligations – except for Retaliation(e.g. workers compensation, disability benefits, unemployment)Strikes/lockouts/unionization – except for RetaliationPrior and pending litigationClaims noticed to prior carrierModification of real property (ADA accessibility) – Defense Costs coverage onlyBreach of Express Employment Contract – Defense Costs coverage only
13 IS EPL INSURANCE ALONE ENOUGH? PeopleSystems FREE risk management tools are a part of the policy.Human Resource consulting services available via toll free numbers (8:00am to 7:30pm, Eastern) and online.Sample HR PoliciesAnti-Discrimination/Anti-HarassmentElectronic CommunicationsEmployment-At-WillHR News Center and recent employment law changesHR Resource Manual and Employment FormsEPL is just one part of atotal risk management plan for every employer.