In Part One of this series, we looked at insurance for employment-related claims against business owners and managers. Specifically, we looked at employment practices liability insurance (“EPLI”), and I suggested you find out if your company has this coverage – which, if you’re doing any of the hiring, firing, or supervising, is something you should know.
Assuming your company (or entity – employment-related claims hit not-for-profits as well) has EPLI, then you need to ask some more questions to really understand what it covers and how it will work. And the time to consider this is before you may potentially have a claim for coverage under it.
You need to ask these questions – of your insurance broker, risk manager, or some other person in the company who deals with insurance – because EPLI coverage varies from policy to policy, and the coverages available vary from insurer to insurer. A non-exhaustive list of the questions to ask would include:
- Who is covered? Are only directors and officers covered, or are managers and lower-level employees included? What about seasonal, temporary, or contract employees?
- What are those people covered for? Does the policy cover only criminal actions and formal lawsuits, or are demands for damages and petitions seeking arbitration covered? Do allegations of a breach of an employment statute trigger coverage, or only a non-statutory breach of contract or tort claim?
- Is retaliation covered? Some policies don’t cover allegations by an employee that she was fired as retaliation for doing something else – like being a whistleblower, for example – while some do. Read the fine print.
- What are the policy’s limits, and do they include paying for defense costs? Many EPLI policies pay for defense costs as an insured person incurs bills (“advances”) them, but you should check this with the policy language.
- Are mental anguish and emotional distress covered? Often, these alleged injuries are excluded from an EPLI policy, because traditionally they would be covered under a business’s general liability policy – but broader EPLI coverage will often include allegations for these injuries as an exception to that exclusion.
Again, this is not an exhaustive list, but it should be food for thought about your EPLI insurance. And, the time to do this review is before you have a potential claim and you’re trying to figure out what your insurance covers. Just like regular dental cleanings can prevent a set of unwanted consequences, an occasional insurance “check-up” for those who hire, fire or manage others can be a good strategy to help understand how to deal with the risks of employment-related litigation.