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Employment Practices Liability (EPL) Exposures And Coverages

By: Thomas M Kallman

Driven by an explosion of employment related lawsuits, employment practices liability (EPL) coverage is a new and needed coverage. Recent legislative and legal changes have provided significant incentives for employees to file employment-related claims, and employers should now possess an increased awareness of employment exposures and be receptive to coverage recommendations that offer risk protection.

Over the last several years, litigation related to employee complaints alleging discrimination, harassment, and wrongful termination has increased dramatically. These suits can cost hundreds of thousands, even millions of dollars. Even an employment related claim without merit could cost an employer $10,000 – $20,000 to defend. Consider it reasonable for you to foresee that a claim may be brought against you if a current or former employee or an applicant for employment has expressed dissatisfaction with the employment relationship, or the employment application process by either making a formal complaint to a supervisory employee of discrimination, harassment, or unfair employment practices; threatening to hire an attorney; asking for a severance package in excess of what is being offered; complaining of discrimination, harassment, or unfair treatment, and threatening to do something about it; or frequent complaining of discrimination, harassment or unfair treatment.

Monetary remedies available under the laws enforced by the EEOC are as follows:

Lost wages and prejudgment interest; liquidated/double damages; compensatory damages; and punitive damages.

EPL coverage typically provides coverage for employment claims from the following areas: Wrongful employment (hiring or termination); Sexual harassment & Discrimination. In selecting and pricing risks, underwriters look at a variety of factors. These include the obvious ones such as the number of employees and the location of the risk. Other factors include the industry, employment practices, loss experience and operating characteristics.

Because of these variables, EPL policies come in a wide range of types and are offered by a number of different insurers. Often, the best price, coverage, and service option may be provided by a smaller specialty insurer. Comprehensive, competitively priced coverage is available for all types and sizes of accounts. Coverage can be provided as either stand-alone EPL coverage or EPL coverage as an extension to a Directors & Officers Policy.

Many entities do not have coverage now, and need this coverage. The time to secure a policy is before a problem occurs, as most insurers underwrite this line very carefully, taking prior complaints very seriously. In order to be considered by an insurer, a Company must first establish a formal employee procedure manual and follow each and every section in a consistent manner.

EEOC publications are available free of charge from:

U.S. Equal Employment Opportunity Commission
Publications Information Center
P.O. Box 12549
Cincinnati, Ohio 45212-0549
(800) 669-3362 (voice)
(800) 800-3302 (TDD)
(513) 791-2954 (FAX)

Thomas Kallman is President of TMK Risk Management Inc
DBA Kallman Insurance Agency. PO Box 266736 Weston, Florida 33326. Phone: 954.389.5897 Fax: 954.389.6661
Website: Your inquiries are always welcome.

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