Professional liability insurance encompasses many industries, specialties, and coverages. Employment practices liability is one coverage falling under the umbrella of professional liability. Employment practices liability, commonly abbreviated as EPLI or EPL coverage, provides defense and indemnity(not all carriers might cover indemnity payments)costs relating to damages stemming from employee allegations against employers of employment violations. These violations include claims related to discrimination against protected classes (for example, age, race, gender, disability, sex, and religion); wrongful termination, retaliation, harassment (sexual harassment, hostile work environment); wrongful discipline and other employment issues that could be considered a violation.[1] Some carriers policies also extend EPL coverage for third-party discrimination claims. EPL coverage is not to be confused with workers’ compensation, and EPL policies expressly exclude coverage for bodily injury claims.

Social and Economic Factors Affect EPL-Related Claims

Generally, employers have adopted and implemented employee policies to reduce instances of employment violations. As societal changes arise with issues that might be related and relevant to workplace adjustment, it would be beneficial for organizations to update their employment policies. Societal changes of note that have affected EPL coverage include whistleblowing and the Me Too movement. Under the Whistleblower Protection Act of 1989 and similar state and federal laws, retaliation against whistleblowers is illegal. These laws prohibit employers from threatening action against employees who engage in activities protected under those laws, such as revealing information about an employers violation in their operations.[2] Whistleblowers might be subject to increased tension in the workplace, hostility from peers and superiors, and possible job termination or role demotion.[3] The U.S. Equal Employment Opportunity Commission (EEOC) reported in their 2020 data that retaliation was the most frequent allegation as it made up 55.8% of all filed charges.[4]

The Me Too movement, founded by Tarana Burke in 2006, was formed in solidarity with survivors of sexual violence. The movement gained worldwide momentum in 2017, and sexual assault survivors began coming forward, vocalizing their experiences, many of which involved workplace superiors.[5] Laverne Wingfield, AVP of Professional Lines Claims at Ullico Casualty Group, LLC, stated that because of the heightened awareness of the Me Too movement, sexual harassment claims saw higher settlement values and amounts, especially in heavily populated/highly litigious areas.

Another area of influence on employee policies is the economy. Downward changes in the country’s economy can cause financial strain on companies, giving them no alternative other than layoffs and stricter working requirements. An economy in recession has been shown to cause an uptick in EPL-related suits. When the U.S. economy experienced a financial crisis in 2008, many companies had no choice but to conduct layoffs and other terminations. During this time, insurance companies saw an increase in EPL-related claims, and the EEOCs charge statistics showed total charges reported in 2008 of 95,402 up by 15% from the prior year.[6]

The COVID pandemic, however, had a reverse effect on EPL-related charges. The EEOC showed a reduction in the number of charges during the pandemic. In 2019, the EEOC received 72,675 filings, 67,448 in 2020, and 61,331 in 2021.[7] Factors for consideration in analyzing this reduction include virtual and remote work environments, and people leaving the workforce to spend more time with their families, caring for family members, or having a better work-life balance.

With social media influences, the addition of new protected employee classes, and the strengthening of laws surrounding established protected classes, the fear of employer retaliation has dwindled, and employees have become more vocal about their negative experiences in the workplace. Although some cases reported to the EEOC are unfounded, it is still imperative for employers to take steps to negate these claims. Many employers have revamped their employee policies to include specifics on the actions that constitute discrimination, retaliation, etc., and the ramification stance the organization will take if these allegations are decidedly warranted. Despite these changes, there is still an increase in EPL-related losses for insurance carriers. It can then be deduced that just having employee policies do not eliminate EPL claims. However, according to Wingfield, having written, accessible employee policies can be a viable defense when claims are made provided the policies are being followed which could mean a lower paid settlement. We have seen higher payouts for claims where employee policies were in place but were not being followed.

Policies and Training Reduce Exposure to EPL-Related Claims

What attempts can employers make to reduce their exposure to EPL-related claims? So far, insurance carriers have seen no way to eliminate allegations of employee workplace violations; however, additional measures might be beneficial in its reduction. A higher percentage of EPL-related claims surrounds the interactions between employees and upper management. Therefore, addressing the need for more frequent managerial training on employee policies, interpersonal communication, awareness of personal biases, and basic workplace etiquette are other areas that require attention. The employee handbook should be reviewed and updated annually to ensure adherence to employment laws, and organizations can benefit from having an attorney review their policies and procedures to ensure proper compliance with federal, local, and state laws and regulations. Some insurance carriers provide these EPL-related resources complimentary to their insureds with access to experts in the industry. Insureds can check with their EPL insurance carrier and inquire about the availability of resources to implement employee policies and how to relay them appropriately to team managers and their teams.

It might also benefit managers to have a refresher of their organizations employee policies at least two to three times annually. Managers are commissioned with the responsibility of overseeing not just their team’s daily duties but also all aspects of interactions within the workplace. They manage the interpersonal relationship between themselves and subordinates and the relationship between employees and their peers. The EEOC discrimination charges can be linked to biases, including discrimination based on race, gender, sexual orientation, national origin, religion, disability, and age. Having an awareness of personal biases is frequently overlooked as a way to ensure these biases are not visible in communicating with others. Not everyone is aware that they hold biases, and that unawareness allows the bias to influence how they interact with others targeted by these beliefs. One way to identify these biases is by having executive coaching sessions or consulting an organizational psychologist to observe and identify issues and how best to address them.

There is no fool-proof method to eradicate EPL-related suits, but with the tools mentioned, there are ways to reduce the severity and frequency of occurrences. We expect the laws and regulations governing employee rights to become even stricter. Therefore, it is in the best interest of employers to stay abreast of these laws and enforce them accordingly.

Reference

[1] Union Liability Insurance. Ullico Inc. (2023, February 17). https://www.ullico.com/products/union-liability-insurance/

[2] Levineblit. (2022, November 15). What is a whistleblower?: Levine & Blit, PLLC. Levine & Blit. http://www.levineblit.com/blog/what-is-a-whistleblower-everything-you-need-to-know/.

[3] Levineblit. (2022, November 15). What is a whistleblower?: Levine & Blit, PLLC. Levine & Blit. http://www.levineblit.com/blog/what-is-a-whistleblower-everything-you-need-to-know/.

[4]EEOC releases fiscal year 2020 enforcement and litigation data. US EEOC. (2021, Feb. 26). https://www.eeoc.gov/newsroom/eeoc-releases-fiscal-year-2020-enforcement-and-litigation-data

[5] me too global movement – what is the ‘me too” movement. Global Fund for Women. (2022, June 28). https://www.globalfundforwomen.org/movements/me-too/

[6] Charge statistics (charges filed with EEOC) FY 1997 through FY 2021. US EEOC. (n.d.-a). https://www.eeoc.gov/data/charge-statistics-charges-filed-eeoc-fy-1997-through-fy-2021

[6] Charge statistics (charges filed with EEOC) FY 1997 through FY 2021. US EEOC. (n.d.-a). https://www.eeoc.gov/data/charge-statistics-charges-filed-eeoc-fy-1997-through-fy-2021

Meet the Author

Venecia Snaith
Lead Senior Underwriter, Professional Liability
Ullico Casualty Group, LLC


Venecia Snaith serves as Lead Senior Underwriter, Professional Liability at Ullico Casualty Group, LLC, with over 15 years of experience underwriting professional lines and over 20 years of experience in the insurance industry. Ms. Snaith’s professional liability underwriting knowledge covers fiduciary liability, directors and officers, non-profit liability, EPL, and medical malpractice. In addition to managing a book of professional liability business, she also implements training for new and seasoned underwriters. Her professional accomplishments include obtaining the RPLU designation and being a 2020 Leadership and Mentoring Program (LAMP) cohort.

Ms. Snaith completed her undergraduate degree in Business Administration and holds a Master of Science degree in Industrial Organizational Psychology. In her spare time, Ms. Snaith volunteers for local charities and organizations.
 
 
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Employment Practices Liability (EPL)

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Professional Liability (PL) Insurance

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