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Basics of Employment Practices Liability InsureOK

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					Employment Practices Liability:
An Overview
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Did you know …                                                                       A
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         An employer is more likely to have an EPL Claim than a General Liability or
          Property loss.

         Fewer than 25% of employers currently carry EPL.
            • There are over 25 million small businesses in the US with under 500 employees
              and not publicly traded (Source: www.sba.gov )

         Three out of five employers are sued by former employees every year (Source:
          Society of Human Resource Managers)

         General Liability policies do not cover EPL or can be endorsed with watered-down
          coverage at low limits.




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                                                                   COMMITTED
MYTHS OF EPL                                                        A
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   MYTH #1
  •    EPL was created by the Insurance Companies to create new premium
       sources.

   MYTH #2
  •    The exposure is no higher today than it was in the past.

   MYTH #3
  •    Employees are already protected under other insurance policies.

   MYTH #4
  •    Internal Risk Management is adequate to protect my business.

   MYTH #5
  •    EPL premiums are too high and the underwriting process too time
       consuming.

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EEOC INVESTIGATIONS                                                COMMITTED
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What An Employer Should Know                                        A
                                                                      DIFFERENCE



    The average time it takes to process an EEOC investigation is …

                               • 229 days

    (longer if there is a delay in responding to information requests) to
        get a determination.


       Think of the defense costs as well as the
        cost of the time of the people involved!!

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                                                                                                   COMMITTED
EPL CLAIM TRENDS                                                                                    A
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          •     Over 40% of EPL claims are brought against private employers with under 100
                employees (Source: SHRM)
          •     Most litigious states: CA, NJ, IL, TX, FL and NY. (Source: Insurance Journal)

          •     Employment practices liability claims represent 30% of all civil litigation in the
                United States today. (Source: Bickmore Risk Services)

          •     550 EPL lawsuits are filed every day (Source: Insurance Journal)

          •     67% of discrimination cases settled by jury verdict are in the plaintiff’s favor

          •     The average cost to defend an EPL claim is $150,000. (Source: Insurance Journal)

          •     The median jury award is $250,000 plus 19% of all cases had punitive damages
                assessed.
                  •   Median punitive award = $259,000 (www.juryverdictresearch.com)



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                                                                                  COMMITTED
EXPOSURES - FEDERAL LAWS                                                           A
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    Fair Labor Standards Act of 1938 (FLSA)
      • Administered by the Department of Labor’s Wage and Hour Division
    Equal Pay Act of 1963 (EPA)
    Title VII to the Civil Rights Act of 1964

    Executive Order 11246 of 1965

    Age Discrimination in Employment Act of 1967 (ADEA)
    Americans with Disabilities Act of 1990 (ADA)
    Americans with Disabilities Act Amendments Act of 2008 (ADAAA)

    Family and Medical Leave Act of 1993

    Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

    Employment Non-Discrimination Act (proposed) – 2007 (ENDA)
    Genetic Information Non-Discrimination Act of 2008 (GINA)


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                                                                    COMMITTED
EXPOSURES - FEDERAL LAWS                                             A
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     The BIG ONE for Employment Practices insurers …

     Civil Rights Act of 1991
          • Amended Title VII
          • Allows for …
                •   a jury trial
                •   punitive damages
                •   damages for mental anguish and emotional
                    distress

                      In 1992, the first stand-alone EPL policies
                                 hit the marketplace.


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EPL COVERAGE FEATURES                                                            COMMITTED
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Covered Perils                                                                    A
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           Discrimination

           Harassment

           Wrongful Termination

           Retaliation

           Expanded Definitions of “Wrongful Employment Act” generally all revolve
            around these four perils

           Violations of FLSA, FMLA and USERRA and similar federal, state and local
            statutes




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EPL COVERAGE FEATURES                                                                      COMMITTED
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Definition of “Insured”                                                                     A
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           •     The Organization

           •     Its subsidiaries
                      “any entity which, on or before the date of the inception of this Policy, is
                       more than 50% owned by the Parent Organization, either directly or
                       indirectly through one or more of its Subsidiaries”
                      Automatic coverage for acquisitions –up to 25% of employee count at policy
                       inception
                      Affiliates? Joint ventures?

           •     Employees – full time, part time, temporary, seasonal
                      Leased employees
                      Independent contractors/1099 employees




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EPL COVERAGE FEATURES                                                               COMMITTED
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Definition of “Claim”                                                                A
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      Written demand
           • An oral threat leads to a “notice of circumstance”
      Demand for monetary damages or non-monetary relief
      Civil proceedings

      Arbitration proceedings but not any labor or grievance arbitration under a
          collective bargaining agreement

      Administrative or regulatory proceedings with the EEOC or similar federal, state or
          local agency

      Office of Federal Contract Compliance Programs (OFCCP) – audit, Notice of
          Violation, Order to Show Cause




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                                                                                                                              COMMITTED
EPL COVERAGE FEATURES                                                                                                          A
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      •   Fair Labor Standards Act (FLSA)
                $100,000 sub-limit for defense costs and loss

      •   Defense Costs Outside the Limit of Liability
               $500,000 limit or more; under 200 employees

      •   Duty to Defend
             Panel counsel requirement
             100% allocation of defense costs

      •   Consent to Settlement Provision – “75/25 Hammer Clause”

      •   Third Party Discrimination and Harassment – 10% additional premium

      •   Full Prior Acts

      •   Punitive Damages where insurable – “most favorable venue”

      •   Extended Reporting Period (ERP): 1-2-3 year options built in
               Notice of Claim or Circumstance as soon as practicable but no later than 60 days after expiration of the policy

      •   Non-cancelable by the insurer, except for non-payment of premium

      •   Three year installment option available on most accounts




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EPL COVERAGE FEATURES                                                                                    COMMITTED
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Common Exclusions                                                                                         A
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   Bodily injury/property damage
     • Coverage “carve back” for mental anguish, emotional distress, libel, slander, defamation, humiliation and
             invasion of privacy resulting from a “Wrongful Employment Act”

   Fraud or dishonesty – except for vicarious liability of the entity

   ERISA-related claims – except for Retaliation

   Statutory obligations – except for Retaliation
         •   (e.g. workers compensation, disability benefits, unemployment)

   Strikes/lockouts/unionization – except for Retaliation

   Prior and pending litigation

   Claims noticed to prior carrier

   Modification of real property (ADA accessibility) – Defense Costs coverage only

   Breach of Express Employment Contract – Defense Costs coverage only



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IS EPL INSURANCE ALONE ENOUGH?                                               COMMITTED
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PeopleSystems                                                                 A
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     FREE risk management tools are a part of the policy.
           Human Resource consulting services available via toll free numbers
                (8:00am to 7:30pm, Eastern) and online.
           Sample HR Policies
              • Anti-Discrimination/Anti-Harassment
              • Electronic Communications
              • Employment-At-Will
           HR News Center and recent employment law changes
           HR Resource Manual and Employment Forms

                            EPL is just one part of a
                total risk management plan for every employer.

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Thank you for your business!

				
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posted:10/11/2012
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