Employment Practices Liability Insurance (EPLI) is a type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include wrongful termination, discrimination, sexual harassment, and retaliation. The policies cover directors and officers, management personnel, and employees as insureds. Coverage is usually written on a claims-made form with a shared limit for defense and judgement.
How to Mitigate the Cost of EPLI
The cost of EPLI varies based on the size and scope of the company. The number of employees and limit and retention chosen directly affects the premium charged along with any prior allegations or claims. Several steps can be taken to mitigate the overall cost of EPLI by proactively managing your risk.
First and foremost, engaging a Human Resources (HR) professional is key. You can hire an HR manager or use an HR management service. Provide ongoing training, especially for harassment and discrimination prevention. Form and follow internal protocols for hiring and firing associates and respond promptly to internal HR allegations. Remaining claim free and shoring up internal policies is a great defense to rising premiums. To assess your risk and offer options, specialty applications and supplemental information about HR policies and processes must be submitted for review.
EPLI Claims
Common allegations we see:
- Failure to hire or failure to promote: One common claim that’s filed under EPLI is failure to hire or promote based on protected classes.
- Discrimination: Unfair treatment based on religion, age, ethnicity, gender, disability, skin color, sexual orientation, race
- Harassment: By Senior management, supervisors, and co-workers. Even good-natured ribbing can be deemed harassment. Harassment is not defined through the harasser’s intention but the eye of the victim.
- Wrongful Termination: This is the most common claim brought against employers per the Equal Employment Opportunity Commission (EEOC).
Other claim areas include wage and hour, retaliation, breach of an employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of a career opportunity, and wrongful infliction of emotional distress.
Claim Statistics:
- The average cost of settling out of court for an employment claim is $75,000
- The average jury award for an employment-related case is $217,000
- The average duration of an employment claim spans more than 300 days
Emerging Trends
This market has also hardened in part because of the higher frequency and severity of claims as well as increased legislative activity at both the state and federal levels. Pandemic-related remote work operations, return-to-work plans, and furlough or layoff decisions have fueled a variety of EPLI claims across industry lines (e.g., discrimination, invasion of privacy and retaliation).
In addition to pandemic-related issues, EPLI has also seen a recent rise in potential exposures due to a wide range of emerging trends including an aging workforce, increased LGBTQ protections, social movements, employee privacy laws and widespread marijuana legalization. Moreover, judges and juries seem increasingly sympathetic to plaintiffs in employment-related actions. Developments and trends to watch include:
Pandemic-Related Claims
The ongoing COVID-19 pandemic has forced many organizations to make workplace changes such as remote work, adjustment of office setups, and conducting staff layoffs or furloughs. With these changes, EPLI claims followed. According to the latest data from Fisher Phillips, there have been nearly 4,000 pandemic-related lawsuits filed against employers. Some of the top pandemic-related EPLI claims since the initial onset of COVID-19 include:
- Allegations regarding employee leave concerns and remote work options (27.7% of claims)
- Allegations of discrimination related to workplace adjustments or layoffs (26% of claims)
- Allegations of retaliation (23.3% of claims)
- Allegations regarding wage and hour concerns (7.2% of claims)
- Allegations of unsafe work conditions (3% of claims)
- Allegations related to vaccine mandates (2.8% of claims)
Vaccine Mandates
With COVID-19 vaccines readily available across the country, workplace vaccination requirements have been a hot topic on both the state and federal levels. While the U.S. Equal Employment Opportunity Commission (EEOC) issued guidance explaining that employers are permitted to mandate COVID-19 vaccinations among their workforces, they must do so in compliance with Title VII and the Americans with Disabilities Act.
In other words, employees can object to vaccine mandates if these requirements conflict with their religious beliefs or pose medical concerns related to their disabilities. As such, employers who issue vaccine mandates within their workplaces could face legal complications from employees who allege religious or disability discrimination, thus resulting in EPLI claims.
Furthermore, the culmination of executive orders from the White House, ongoing challenges to the federal government’s emergency temporary standard and conflicting state requirements regarding vaccine mandates have created additional confusion and compliance difficulties for employers. These difficulties could potentially lead to increased vaccine related EPLI claims.
Marijuana Legalization Considerations
For the past decade, many states have been moving toward the legalization of marijuana. Currently, medical marijuana is legal in 37 states, and recreational marijuana is legal in 19 states. As a result, some states have enacted legislation restricting an employer’s ability to conduct drug tests for marijuana.
Additionally, several state court cases have ruled in favor of the employee in recent employment lawsuits related to marijuana usage. According to the latest Advisen loss data, 40% of marijuana-related EPLI claims have stemmed from wrongful termination allegations—such as an employee getting fired for a positive drug test, even though they were using marijuana away from work for legal medical reasons. Employers with outdated policies and procedures regarding marijuana testing and usage could face an increased risk of EPL claims.
Social Movements
Various social movements could play a part in employment litigation and subsequent EPLI claims. The #MeToo movement, which is an anti-sexual harassment campaign that has garnered increased social media attention over the years, has since empowered employees to call out instances of inappropriate workplace conduct—largely contributing to a 50% rise in sexual harassment lawsuits against businesses in the last five years, according to the EEOC.
In addition, the Black Lives Matter movement, which is a racial justice campaign that originated in 2013 and resurfaced, may motivate employees to speak out against racial inequities on the job—potentially becoming a factor in race-related workplace discrimination and harassment lawsuits in the years to come.
LGBTQ Protections
The U.S. Supreme Court recently made it clear that Title VII protects gay and transgender employees from workplace discrimination and harassment based on sexual orientation, gender identity and gender expression. While this is a somewhat new development, the Supreme Court’s decision could result in further discrimination based EPLI claims, as LGBTQ employees may feel more encouraged to hold businesses accountable for unfair treatment.
Retaliation Claims
Retaliation is defined as an employer taking inappropriate actions against an employee for exercising their workplace rights. For example, an employer demoting a worker for filing a harassment complaint would qualify as retaliation. According to the EEOC, retaliation has repeatedly reigned as the top cause of employment litigation and subsequent EPLI claims in the past few years. In fact, the most recent data confirmed that more than half of all employment charges filed with the EEOC involve retaliation. That being said, employers who fail to react appropriately when workers utilize their employment rights could encounter increased retaliation related EPLI claims going forward.
Exclusions
As with other specialty lines products, no two forms are alike. Carriers giveth and they taketh away through exclusions. Common exclusions include criminal or civil fines, penalties or punitive damages, bodily injury and property damage claims, state unemployment insurance claims, workers’ compensation claims, and claims filed under the Fair Labor Standards and Occupational Safety and Health Acts.
Safeguarding Your Success
The landscape is continuing to change. Many firms experienced a 10-25% rate increase in the prior term as claims were on the rise for the prior two years. We’ve seen this level some to single rate increases, but preparation and processes are still key. Sentinel has a team of experts ready to assist in EPLI and other key specialty areas. Contact us today to learn more.
