Travelers offer an employment practices liability policy (EPL PLUS) through its bond division. The policy is written on a claims-made basis, with defense costs included in an aggregate limit of liability. The policy offers broad definitions of discrimination, sexual harassment, and wrongful employment practice.

The Travelers Web Site says that EPL PLUS covers lawsuits arising from allegations of wrongful termination, sexual harassment, and discrimination as well as:

     Protected Status Harassment

     Retaliation

     Wrongful Failure to Employ

     Wrongful Failure to Promote

     Wrongful Denial of Training

     Employment Related Infliction of Emotional Distress

     Employment Related Defamation or Misrepresentation

     Employment Related Invasion of Privacy

Other noteworthy provisions are:

1.     No coinsurance provision.

2.     Punitive damages are covered, if allowed by law. The insured may receive a premium discount for removal of punitive damages coverage.

The Web Site gives statistics that bring home the need for an employer to have this type of coverage. Travelers cite Jury Verdict Research: of awards totaling $1 million or more, slightly more than 10 percent were employment related in 1991-93. That percentage jumped to 18 percent by 1996-97. The average employment related award was over $450,000 in 1997.

Finally, in an effort to make these claims real to the reader, the Web Site quotes several stories about employment awards:

1.     ”A federal jury awarded a total of $850,000 to a quality assurance worker who alleged that he was denied promotions at a telecommunications company in the northeast because he is Mexican-American. He was awarded $50,000 for lost wages and benefits, $50,000 in general damages and $750,000 in punitive damages.”

2.     ”A hospital agreed to pay a former nurse $110,000 to settle a race and disability discrimination lawsuit filed on behalf of the nurse by the EEOC. The hospital also agreed to provide race and disability discrimination training to its supervisors and managers. The plaintiff alleged that the hospital began to give her negative performance reviews after she had a heart attack. She was placed on probation and eventually was fired when she failed to meet extraordinarily high goals that were set for her, which were tougher than those set for her white and non-disabled co-workers. The hospital denied it discriminated against the plaintiff, and stated that settling the suit was a business decision that allowed both sides to avoid mounting litigation costs.”

2. CONTACT

Travelers Bond One Tower Square, 3PB Hartford, CT  06183 (860) 954-2650 http://www.travelers.com

3. UNDERWRITING GUIDELINES

Travelers say that the following are its target markets for this coverage: growth industries; manufacturers and wholesalers; select business services; and up to 2000 employees for primary coverage and any number of employees for excess.

4. AVAILABILITY OF COVERAGE

All states.

5. LIMITS AVAILABLE/DEDUCTIBLES

Limits are available on either a primary or excess basis. Minimum premium is $1,250; minimum deductible, $5,000.

6. INSURING AGREEMENT

The Travelers Employment Practices Liability PLUS policy promises to pay damages assessed against the insured because of any wrongful employment practice. The allegation of a wrongful employment practice is also covered.

In addition to payment for damages, the policy also promises to defend the insured against these allegations. The insuring agreement specifies that defense expenses are part of the annual aggregate limit of liability.

7. DEFINITIONS

The following terms are defined:

A.     Claim — is a written demand or notice including an actual or proposed summons, pleading or other legal document that the insured receives from a claimant. The notice must allege a wrongful employment practice.

B.     Claimant — is a present or former employee of the named insured. It also includes those who have applied for employment with the named insured.

     Interestingly, a claimant may also be the Equal Employment Opportunity Commission or some similar agency. The definition includes such an agency when it is acting on behalf of a current or former employee or applicant.

C.     Damages — means money that an insured is legally obligated to pay. Damages may include back pay and front pay, compensatory damages, and punitive damages.

The definition then goes on to give a long list of things that are not payable as damages under the EPL PLUS policy:

1.     Civil or criminal fines.

2.     Costs and expenses incurred or to be incurred to comply with an order that grants equitable relief.

3.     Severance pay.

4.     Employee benefits, unless their value is included in a judgment or settlement.

5.     Future compensation of all kinds, if the insured has the option to hire, re-hire, or promote the claimant and refuses to do so.

6.     Any amount payable to someone other than the claimant. The spouse of a claimant, for instance.

D.     Defense expenses.

E.     Discrimination — Note: this is one of the offenses that make up the definition of “wrongful employment practice” (see below). It includes:

1.     failure to hire an applicant;

2.     termination of an employee;

3.     refusal to train or promote an employee;

4.     any other act where the employer treats one employee differently from another.

The policy then goes on to list the typical characteristics that may become grounds for a discrimination action: age, sex, gender, religious affiliation, sexual orientation, etc.

In the promotional material, Travelers says this about the EPL PLUS definition of discrimination: “Distinguishing features of our definition of 'Discrimination' include among others, constructive termination, refusal to train or promote, or any other act where an employee is treated differently in terms of compensation, opportunities, or in a manner having the impact of distinguishing, limiting or segregating.”

F.     Employee — includes part-time, seasonal, and temporary workers. The definition does not include leased employees or independent contractors.

G.     Insured — includes the named insured, employees, partners, officers, and directors.

H.     Named insured.

I.     Policy period.

J.     Potential claim — a written notice from a claimant that an offense (a wrongful employment practice) has occurred, that may turn into a claim.

K.     Proceeding — may be a civil or administrative proceeding, as well as arbitration or mediation.

L.     Protected status harassment — this is harassment that is inflicted upon someone because the harasser perceives that person to have “protected status;” i.e., someone perceived to be protected by certain statutes and regulations.

M.     Related claims — arise out of the same incident.

N.     Responsible person — the policy actually lists three different types of “responsible persons”:

1.     Partners, officers, or directors;

2.     The insured's HR staff;

3.     The insured's legal staff.

O.     Retaliation — is any adverse employment action taken against an employee because that employee participates in a proceeding regarding the insured's violation of a law.

P.     Sexual harassment — includes both quid pro quo and hostile, intimidating or offensive work environment exposures.

Q.     Wrongful employment practice — this is what must be alleged against the insured. A wrongful employment practice may be any of the following 18 items:

1.     wrongful termination;

2.     breach of any employment agreement;

3.     employment-related misrepresentation;

4.     discrimination;

5.     wrongful failure to employ;

6.     wrongful failure to promote;

7.     sexual harassment;

8.     wrongful discipline;

9.     retaliation;

10.     wrongful denial of training;

11.     wrongful deprivation of career opportunity;

12.     wrongful denial or deprivation of seniority;

13.     wrongful failure to grant tenure;

14.     wrongful evaluation;

15.     invasion of privacy;

16.     employment-related defamation;

17.     protected status harassment; and

18.     employment-related infliction of emotional distress.

8. WHO IS INSURED

See the definition of insured, above.

9. WHAT IS INSURED

The policy protects the insured against “wrongful employment practices,” as defined.

10. EXCLUSIONS

The policy covers all claims for the above coverages except:

A.     Criminal acts by the insured. The insurer must continue to defend and indemnify the insured until such acts are proven. The criminal act of one insured does not void the policy for the other insured.

B.     Death, disease, or loss of consortium brought on by a wrongful employment practice.

C.     Pre-existing wrongful practice — any event that may be regarded as a wrongful employment practice that occurred prior to the policy's effective date.

D.     Failure to comply with a law, such as Workers Compensation, Unemployment, Social Security, etc.

E.     Any investigation of practices such as payroll, wage and hour policies, overtime pay, vacation pay, etc.

F.     Liability assumed in a contract.

G.     Violations of ERISA.

H.     Violations of COBRA.

I.     Pollution.

11. CONDITIONS

The following provisions, while not labeled “conditions” operate as conditions in the policy:

A.     Deductible.

B.     Limits of liability.

C.     Consent to settle — the insurer may not settle without the consent of the insured. However, if the insured refuses, the insurer no longer owes defense or indemnification.

D.     Claims made extension clause — an extended reporting period (thirty days after the policy's expiration) when the insured may report claims that occurred during the year.

E.     Cancellation — a ten-day notice is required for non-pay cancellation; sixty days for any other reason.

F.     Changes in exposure — newly acquired entities are insured under the current policy if the named insured owns more than 50 percent of the entity. If more than 50 percent of the ownership changes hands, the policy automatically terminates.

The following are contained in the “conditions” section of the policy:

A.     Insured's duties in the event of a loss — notify and cooperate with the insurer; and forward copies of all notices and summons to the insurer.

B.     Action against the company — may not be brought until all conditions have been met and the insured's obligation under the policy has been determined.

C.     Other insurance — this policy is excess unless the other policy is written as excess coverage.

D.     Subrogation.

E.     Changes.

F.     Assignment.

G.     Representations — all statements in the application are true and become part of the policy. The policy does not apply to any insured who knew at policy inception that a statement was untrue. It does not apply to the named insured if the person signing the application knew that the statement was false.

H.     Authorization — the first named insured is authorized to at on behalf of the other insureds.

I.     Liberalization.

12.     OTHER COMMENTS

The Travelers Web Site points out other advantages of EPL PLUS:

1.     The inclusion of “protective status harassment” in the definition of “wrongful employment practice.” This is a new area and Travelers was one of the first insurers to recognize it and place it in their policy.

2.     There is no exclusion for liability arising out of “downsizing.” The policy also does not exclude intentional or willful acts.

3.     No coinsurance requirement.

Available endorsements to the EPL PLUS policy include:

1.     Amend definition of claimant — this definition may be broadened to include leased employees and independent contractors, thus offering coverage to the insured for actions by these two.

2.     Add volunteers to definition of employee — volunteers may be added to this definition if their work is engaged in and directed by the named insured.

3.     Multiplied damages — multiple damages – other than punitives – may be covered with this endorsement.

4.     Amend claims made extension — the thirty-day automatic period may be amended to any length of time.

5.     FMLA endorsement — with this endorsement, “retaliation” includes actions against an employee on account of that employee's exercise of rights under the Family and Medical Leave Act (FMLA). FMLA is also added to the definition of discrimination.

6.     Subsidiary endorsement — adds subsidiaries to the definition of “named insured.”

7.     Third party liability endorsement — amends several definitions to include coverage for actions brought by third parties (other than employees) alleging sexual harassment.

8.     Workplace harassment endorsement — adds this definition as harassment, other than sexual, that creates a hostile work environment. The endorsement also adds failure to enforce workplace policies and workplace harassment to the definition of wrongful employment practice.

Everyone who purchases an Employment Practices Liability PLUS policy, receives Risk Management PLUS, a loss control program designed to help decrease the insured's exposure to employment litigation and claims.

The Web Site describes Risk Management PLUS as “a flexible, comprehensive program” that works within the insured's existing Human Resources management structure. It provides risk management tools such as:

     Training for front-line managers.

     Quarterly subscription to risk management newsletter.

     Updated handbook policies.

     Updated personnel forms.

     Instructions on proper use of personnel policies and forms.