If you don't know the answer to this question with absolute certainty, you had better go back and check your policy. In Cracker Barrel v. Cincinnati Insurance Company, a Tennessee federal court concluded that the employer's EPLI policy provided neither coverage nor even a defense to a Title VII action brought against it by the EEOC. Why? The policy in question defined a "covered claim" as "a civil, administrative, or arbitration proceeding commenced by the service of a complaint or charge, which is brought by any past, present or prospective employees." The court read this provision literally and concluded that because the EEOC was not an employee, the complaint brought by it on behalf of the company's employees was not a covered claim.

Regardless of the correctness of this decision, employers need to review their EPLI policies to see how they define a covered claim. If it is not clear that the policy covers both claims brought by and claims brought on behalf of employees, then it makes sense to go back to the insurance broker to obtain clarification from the carrier on whether the latter type of claim falls within the definition. Because claims brought by the EEOC and other governmental agencies can be among the most expensive to defend, it is important for employers to know whether they are getting what they think they are paying for.