EPLI: What Do These Policies Really Cover?
Many employers view employment practices liability as a definitive way to control losses. Although this coverage may seem all-encompassing, it is important for employers to consider the fine print of their policy. For example, a case involving the National Waste Associates vs. Travelers Casualty and Surety Co. resulted in a denial of coverage in a wrongful discharge claim due to small details. It is important to review the provisions of your clients’ policy to help them avoid Employment Practices Liability Risks.
The employer, National Waste Associates, purchased an Employment Practices Liability Insurance (EPLI) policy for 2/15/07-2/15/09 which included a “claims made” provision. A former employee filed a claim against the employer on 5/12/07 for wrongful discharge. However, the insurer denied coverage of the claim on the grounds of the agreement provision that excluded prior litigation. As the former employee and the employer participated in a 2005 proceeding over a dispute involving unemployment benefits, the insurer was exempt from paying. As the statute claimed:
This [l]iability [c]overage shall not apply to, and the [defendant] shall have no duty to defend or to pay, advance or reimburse [d]efense [e]xpenses for, any [c]laim . . . based upon, alleging, arising out of, or in any way relating to, directly or indirectly, any fact, circumstance, situation, transaction, event or [w]rongful [a]ct underlying or alleged in any prior or pending civil, criminal, administrative or regulatory proceeding, … against any [i]nsured as of or prior to the applicable [p]rior and [p]ending [p]roceeding [d]ate set forth in [the policy declarations].
The court ruled that the unemployment hearing is absolutely considered administrative and that the employer must cover the claim damages.
As an agent, it is imperative you understand the wording of these tedious documents to ensure adequate coverage for clients. Although specific laws and coverage may vary by state, understanding policy limits as they relate to a variety of claims can minimize lawsuits against your clients and even your own agency. At PL Risk, we understand the liability risks that agents face and are here to provide proper protection for your clients.