(August 2019)
Allegations made by employees claiming to have suffered various types of financial loss or emotional injury because of their employers' acts (or failure to act) are common. Examples of such allegations are damages due to wrongful termination, demoting an employee without justification, failure to hire or promote a worthy employee, unwarranted discipline or abuse (particularly sexual harassment). Many of these wrongful offenses are due to illegal discrimination on the basis of age, gender, religion, race, nationality, or sexual orientation. Other offenses may be claimed as violations of the individual’s civil rights, or the failure to accommodate a mental or physical limitation or disability. Sexual harassment by the employer’s management or supervisory staff, or by fellow employees, has grown to include allegations of same-sex harassment. The MeToo movement has encouraged many to speak up regarding sexual abuse, physical, mental or emotional abuses that have taken place or that continue to take place.
Related Article: EEOC Discrimination Charges and Lawsuits
An employer must be aware that potential abusers may be part of its workforce. Therefore, it must take great care to have firm, written policies and procedures in place to prevent such abuses and injuries and effective reporting guidelines for swift action if abuse should take place. Various laws and government agencies hold employers responsible for the training and implementation of programs to protect their employees from supervisors and fellow employees. Employees are becoming more aware of their rights and are gaining the will to seek to have unacceptable actions and work environments addressed.
Unfortunately, an employer’s commitment to eliminating abuses in the workplace may not be enough. The occasional employee may still sustain or claim to have sustained an injury and the employer’s Comprehensive General Liability (CGL) policy probably won’t respond.
Related Court Cases:
"Employment Termination Emotional Distress Held Not Covered"
Sexual Harassment Allegations Held Not To Be Covered "Occurrence"
No Insurer Duty to Defend Clearly and Unambiguously Excluded Civil Rights Claims
Sexual Harassment Suit Isn’t Owed Insurer Response
Standard CGL policies respond to bodily injury, property damage and personal and advertising injury which have been defined in the policy and by numerous court decisions. Most employment-related injuries are mental, emotional or financial. Some courts have extended the definition of bodily injury to include mental or emotional injury, especially if there are physical manifestations, such as migraine headaches, vision problems or stomach problems. However, many do not. Financial and monetary damages aren’t typically considered to be property damage.
There are other barriers to coverage for employment-related claims under the CGL. First, the policy’s exclusion of expected and intended injury is often cited when adverse employment-related practices exist. Second, insurers have, with few exceptions, added an absolute exclusion of any employment-related injury. Clearly, employers must look elsewhere for coverage.
Related Articles:
CG 21 47–Employment-related Practices Exclusion and Employment Practices
Understanding Employment-related Practices Liability
Sassaman V. Gamache: Possible Impact on the ERPL Exposure
ISO Employment-Related Practices Liability Policy includes the following forms:
Related Article: IL 00 17–Common Policy Conditions Analysis
Related Article Employment-related Practices Liability Declarations Page
Related Article: Employment-related Practices Liability Coverage Form Analysis
Here is a brief overview of some of the more unusual aspects of the EP 00 01.
Defense Expense
Limitation
The limit of insurance shown in the declarations is the most that will be paid for the total of all costs including defense expense. It is extremely important to be aware of this limitation when setting the limit.
Deductible
The ERPL includes a fixed-dollar deductible which is unusual for liability coverage. The ERPL policy, as well as some optional endorsements, includes several examples to illustrate how deductibles and co-payments are applied. When both a deductible and a co-payment percentage are used, the deductible is first subtracted from a settlement or defense expense.
Consent to Settle
Condition
In order to protect its reputation or for other reasons, the named insured can prevent the insurer from agreeing to a settlement, but this action may come at a cost. If the insurer and claimant reach a settlement agreement and the named insured declines, the most the insurer is obligated to pay is the amount it would have paid if the named the insured had agreed to a settlement.
If You Are Permitted
To Select Defense Counsel Condition
The insurer may permit the named insured to select the defense counsel. This happens either by mutual consent or by order of a court or administrative body. When it does happen, the insurer still retains the right to attempt to settle with the claimant (with the named insured’s consent) and to appeal any settlement. The insurer is obligated to handle any expenses of an appeal.
Endorsements are available to tailor this coverage form. Some extend the coverage to include non-employees, volunteers, independent contractors or even customers. Others significantly restrict coverage.
Related Article: ISO Employment-Related Practices Liability Coverage Form Available Endorsements and Their Uses for a numerical listing and brief description of the forms and endorsements available.
Underwriting of this exposure is very different from underwriting Commercial General Liability because the potential claimants are the employees of the named insured. A key to loss prevention is the consistent and fair treatment of all employees.
Related Article: Employment-related Practices Liability Underwriting Considerations
The premium is calculated based on the number of employees which is logical because the claims will come from an employee. However, there are other factors to consider.
Related Article: Employment-related Practices Liability Rating Considerations