To help you understand why Employment Practices Liability Insurance should be on your radar I’m going to share a real world example. The following is an account of an employment incident that occurred at a large national insurance firm:

A position for a client service position opened at the firm. An advertisement for the position was posted. A young woman responded, applied for the position, and went through the interview process. She was given a written offer of employment for the position with a start date one month later. After receiving the offer letter, but before her start date, she called the employer to let them know she was pregnant. The employer immediately withdrew the offer letter. Shortly thereafter, the employer was sued for employment discrimination.

Unfortunately, these types of situations occur far too often. Most often they occur in an inadequate policies and procedures and leaky accountability.

The need for Employment Practices Liability Insurance (EPLI) is unquestionable and it is important that you understand your school’s potential exposures. Most of these claims result from wrongful acts arising from the employment process.

EPLI is one of the fastest growing areas of concern today for Educational Institutions. Litigation by employees (present and past) for employment practice allegations has been on the rise and will most likely increase in the future. Claims from “third parties,” such as customers and vendors, also pose an exposure to an employer.

The most frequent types of claims include:

  • Wrongful termination
  • Discrimination
  • Sexual harassment
  • Retaliation

Other areas of potential “wrongful employment acts” are:

  • Employment related defamation
  • Invasion of privacy
  • Failure to promote
  • Deprivation of a career opportunity
  • Negligent evaluation
  • Violation of the Equal Pay Act of 1963
  • Violation of Title VII of the Civil Rights Act of 1964
  • The Nineteenth Century Civil Rights Acts – amended in 1993
  • The Age Discrimination in Employment Act (ADEA)
  • The American with Disabilities Act (ADA)

It is important for you to understand the differences between EPLI coverage and three other policy types: D & O, and Errors and Admissions Insurance (E&O) and Educators Professional Liability Insurance. Your school has a need for all three of these, however, they cover distinctly different exposures to loss.

For an explanation of the differences in these policies, visit this link.

To prevent employee lawsuits, nothing is more important than having comprehensive employment policies and procedures.

Below are some important features and policy enhancements that should be included when you purchase an EPLI policy:

• Run-off coverage in the event of a merger or acquisition
• Extended reporting periods
• 60-day automatic reporting window
• Optional reporting period of up to 3 years for qualifying accounts
• Bilateral election of extended reporting periods
• Worldwide coverage
• Coverage for claims brought by all past, present and future employees
• Loss includes judgments, settlements, defense costs, front pay, back pay, and punitive
• Defense cost coverage for allegations of FMLA/wage and hour law violation

In an EPLI policy included in the definition of a claim should be civil, criminal, ADR and administrative proceedings. There should be a “no intentional acts” exclusion and the policy should contain third party coverage.

Lastly, as soon as anyone is aware of the potential of an employment related incident (even if it only involves the EEOC), it should be reported to your EPLI insurance company.

Specific questions? Email Rachel Dobbs.

The information provided herein presents general information and should not be relied on as insurance advice when analyzing and resolving a specific issue. If you have specific questions regarding a particular fact situation, please consult with competent insurance brokers and/or legal counsel about the facts and laws that apply.