Compliance with the Fair Labor Standards Act has created much of the additional activity today under employment practices liability insurance (EPLI) coverage. Companies of all sizes can find themselves defending against allegations of discrimination, harassment or violations of wage-and-hour laws. These types of claims can place companies at risk for large financial losses, whether or not the allegations can be substantiated. The key for insurance agents is to help their clients handle situations proactively, with professional guidance and support from their EPL carrier. In this way they can avoid claims in this area, rather than merely responding only after a claim has been made. Because wholesalers specializing in professional lines know all the pros and cons and newest EPL coverage enhancements available on the market, they can help retail agents and brokers find the best fit for their clients. What should you look for in carriers who are best able to protect your clients? Underwriting experts: Will they tailor the policy to fit the unique exposures of your insured? Superior claims handling: Will the carrier quickly and efficiently handle your client's claims, and does the carrier use law firms that specialize in employment practices issues? Risk management: Does the carrier offer a comprehensive risk management program, including hotlines, training, audits, and sample documents for implementation? Financial strength of the carrier: This is especially important in today's uncertain economic climate. Work with only A-rated carriers at the minimum, using admitted paper for the state when available. For example, Atlantic Risk utilizes Beazley (rated A by A.M. Best) and Philadelphia (A+) for our EPL policies as carriers with strong financial backing and innovative EPL policies. Once mainly a concern of larger businesses, EPL is important coverage for businesses of all sizes. “Our small business owner found the benefits of carrying a comprehensive EPLI policy gave them peace of mind with all the employment issued facing small business owners today,” said Jackie Ortega, account manager for Filer Insurance Inc. in Miami, Fla., an agency which recently placed EPL for a small retail business client with Philadelphia through our company. The client was especially pleased with the additional enhancement coverage given by the Philadelphia policy's “Bell endorsement,” including terrorism travel reimbursement, which covers any director or officer for emergency travel expenses that he or she incurs in the event of a “certified act of terrorism;” identity theft expense coverage, which reimburses the expenses of any director or officer who becomes a victim of an incident of identity theft; and workplace violence counseling if a violent incident occurs at any of the insured's premises

Beazley Group, a leading insurer of management liability risks, has launched a new EPL policy that offers expanded coverage for employment-related privacy violations and covers the cost of hiring professionals to help employers cope with a range of major events impacting the workforce.

One of our brokerage clients, ARM-Capacity of New York, found Beazley's product an ideal choice for one of its clients and included the management liability coverage in addition to the EPL. “We were able to include all the features of their current coverage and lowered their deductibles and premium, without sacrificing any coverage and actually added enhancements to their policy,” said Kate Carey, business insurance specialist at ARM-Capacity. In addition to covering claims for discrimination, harassment and other standard employment allegations, the Beazley EPL policy offers: o Privacy violation coverage o Employment event coverage o Outside directors coverage o Civil fines assessed under the Health Information Portability and Accountability Act (HIPAA) o Negligent hiring o Optional additional defense limit o Optional third-party coverage o Wage and hour coverage available to qualified insureds o Claims reporting as soon as practicable o 70/30 settlement clause Beazley's new EPL policy also offers privacy violation coverage, which protects employers against liabilities they may incur in the event of the loss or theft of employees' personal information, including Social Security numbers, account or health information. Coverage also extends to the consequences of an employer's failure to inform employees in a timely manner that their personal information has been compromised, consistent with applicable laws. “Employers have more sensitive information about their employees than ever before, and the exposure in the event that information is compromised is very real,” said Carrie Brodzinski, EPL product manager for Beazley. Another innovative coverage extension in Beazley's new EPL policy is employment event coverage, which provides employers with a sublimit to cover the costs of hiring a public relations firm, a security firm or mental health professionals to cope with the aftermath of one of the following events: o The layoff or material change in the employment status of 20 percent or more of the workforce o Public announcement of a third-party claim or allegations of discrimination or harassment impacting an executive officer o A workplace disaster resulting in the loss of life or imminent threat of the use of a lethal weapon on the employer's premises. The best way to protect against the unexpected cost of an employment claim is to expect the unexpected and to take proactive steps to avoid behavior that can lead to claims. Transfer of risk through insurance is an important backstop once a claim arises, but the best outcome for an employer is never to have a claim at all. As you can see from the examples above, specialty insurers are providing innovative EPL coverages designed to address the challenges of today's work environment. With the right EPL policy, your clients can transfer risk and have all the tools to prevent claims as well. An interview with Philadelphia Insurance Co. Brad Lacey, assistant vice president, product manager of Philadelphia Insurance Co. answered the following questions that I posed at a recent round table discussion. Are there any new claim trends for EPL insurance your company has been monitoring? I can't say it's a trend yet, but we have seen an increase in discrimination lately from both ends of the employment process: hiring and firing. Applicant discrimination causes might be due to a more diverse workforce than ever before and greater competition for the limited openings. Age discrimination claims have increased due to layoffs and downsizing. We also have seen increased activity in retaliation allegations. Additional causes of the uptick may be from the EEOC intensifying its enforcement and greater knowledge of employment laws by the general population. Can you give some advantages of your form for the small business owners today deciding whether they can afford EPL insurance? With today's tight budgets and cost-cutting environment, I don't think management can afford to be distracted with employment litigation that takes the focus away from production. A big advantage to the policy is the defense cost and optional duty to defend. The insured can elect to obligate the carrier to defend the claim and select counsel, subject to the insured approval. In addition, coverage extensions are available for Fair Labor Standards Act or wage-and-hour claims. There is optional coverage for levied fines and penalties for violating federal immigration laws. The claims made EPL policy is broad and relatively inexpensive. Many times it is sold with D&O liability insurance. Given the current economic times with downsizing and layoffs, are you seeing increased EPL situations, and how best to handle? When downsizing or layoffs have occurred or are expected in the future, we underwrite the account in search for a systematic and non-discriminatory reasoning behind it. Was a whole department or division terminated? What determined who got laid off–was it the “last in, first out” method? Was the reasoning clearly documented? Was a severance package offered? Was there a voluntary option, such as early retirement? When these elements are not satisfactory and/or major downsizing is anticipated, underwriters may choose to use a downsizing exclusion that applies if a certain percentage of the workforce is terminated. What can you recommend to clients today to help avoid EPL claims from arising? First document, document and document. Establish, implement and monitor internal employment practices policies and procedures. If a corporation believes its greatest asset is its employees, then the human resource department serves a crucial function. Companies should seek loss control and risk management techniques and be proactive in obtaining legal advice. Many EPL carriers offer such services for their policyholders. Lastly, consider transferring the risk by purchasing a broad employment practices policy from a financially stable insurance carrier.