Employment Practices Liability Insurance

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					        Employment Practices
              Liability



David F. Hodge, Jr., CPCU, MBA
 Hodge, Hart & Schleifer, Inc.
   Even Good Companies-


Have Employees That Make
     Bad Decisions!
       The Basis For
 Employment Practices Liability

 Common Law-created by judges over
 the years

 Statutory Law
            What Is
      “Employment-At-Will”?

Traditionally, the employment-at-
    will doctrine allowed both
   employers and employees to
terminate the employment at any
time, with neither party needing a
      cause for termination.
 Exceptions To Common Law
“Employment-At-Will” Doctrine
   Breach of an expressed contract
   Breach of the implied-in-fact covenant to
    terminate only for good cause
   Breach of the implied covenant of good
    faith and fair dealing, and
   Violation of public policy, such as
    retaliatory discharge
     Wrongful Discharge


     An employee can allege
 “constructive discharge” on the
 basis that the work environment
  became so hostile that he was
  effectively forced to resign to
 protect his financial interests or
physical and emotional well-being.
    “Employment-At-Will”Doctrine
      Exceptions Based in Tort Law
   Defamation
   Invasion of privacy
   Intentional or negligent interference with
    contractual relations
   Intentional or negligent infliction of emotional
    distress
   negligent or fraudulent misrepresentation
   interference with prospective economic
    advantage, and
   Conspiracy
    Civil Rights Act of 1964,
    Title VII


Title VII of the Civil Rights Act of
1964 prohibits discrimination by
 employers on the basis of sex,
religion, race, color and national
               origin.
      Sexual Harassment



 Quid Pro Quo



 Hostile Work Environment
          Sexual Harassment
               Liability

An employer’s liability arises from
the failure to stop, properly train,
or be aware of the sexual
harassment committed by its
employees, supervisors, and even
its customers or clients.
  The Washington Post
   P1, June 27,1998


High Court Draws Line
          on
  Sexual Harassment
   The Washington Post
    P1, June 27,1998

A Still-Undefined Offense
   Courts Differ on What
  Constitutes Harassment
  The Washington Post
   P1, June 27,1998


Employers Held Liable
 Suit Threshold Eased
     The Washington Post
      P1, June 27,1998

By 7-to-2 votes in a pair of cases,
  the justices made it clear that
  workers need no longer prove
that an employer knew or should
  have known about the sexual
 harassment and failed to stop it.
     The Washington Post
      P1, June 27,1998
 And victims do not necessarily
have to show that they lost out on
    a promotion or were fired
 because they spurned a boss’s
  sexual advances; if the boss’s
  threats and other abuse were
    severe or pervasive, that’s
   enough basis for a lawsuit.
What Does This Mean
  For Employers?
   Employers Must
    Have A Policy-




   Prohibiting
Sexual Harassment
       A Sexual Harassment
           Policy Must-
 Be disseminated to all employees,
 and

 Provide clear avenues to register
 complaints of sexual harassment
 (including a procedure for bypassing
 the “harassing supervisor”)
The Age Discrimination In
Employment Act Of 1967

Applies to employers with 20 or
more employees during 20 or more
weeks of a calendar year; prohibits
discrimination in the hiring or
firing because of age, for persons
age 40 or older.
The Rehabilitation Act Of 1973

Applies to employers with federal
contracts of $2,500 or more;
prohibits discrimination in
employment practices on account
of mental health or physical
handicaps.
        1991 Civil Rights Act
         Amended Title VII

    It extended to victims of
 intentional sex, religious, and
  disability discrimination the
availability of compensatory and
        punitive damages.
      1991 Civil Rights Act
      Future Liability Caps
                       CAP

 EE’s 15-100        $50,000
 EE’s 101-200       $100,000
 EE’s 201-500       $200,000
 EE’s 501 &    Up  $300,000
              The Equal Pay
               Act Of 1963

Prohibits discrimination on the basis
of sex in the wage rates of male and
female employees doing work which
requires the same skill, effort, and
responsibility, and which is performed
under similar working conditions,
unless the wage differential is justified
by statutory exception.
         The Americans With
           Disabilities Act

Employers are prohibited from
discrimination against a “qualified
individual with a disability” in
hiring, advancement, discharge,
compensation, job training, and
other conditions of employment.
Who Is Protected By The ADA?

 Persons with a physical or mental
  impairment that substantially limits
  one or more major life activities.
 Persons with a record of such an
  impairment.
 Persons who are regarded as having
  such an impairment.
          Substance Abuse
       As A Disability Under ADA


Reasonable accommodations for
alcoholics and former drug users
are required to assure an
opportunity for them to meet the
employer’s regular employment
standards.
    Reasonable Accommodations
             Include
 Making existing facilities accessible
 Offering part-time or modified work
  schedules
 Granting unpaid leave
 Acquiring or modifying equipment or
  devices
 Restructuring a job by distributing
  nonessential, marginal job functions
      The Family and Medical
        Leave Act Of 1993

Applies to any facility where the
employer has 50 or more
employees within a 75 mile radius.
But, to be eligible, an employee
must have worked at least 12
months for the employer, and at
least 1,250 hours in the preceding
12 months.
FMLA Entitles A “Qualified” Employee
to 12 Weeks Unpaid Leave Annually


 Employee’s serious health condition
 Birth of a child
 Adoption of a child
 Foster care of a child
 Immediate family member’s serious
  health condition
       Recent EPL Claims

Lennox International, a
manufacturer of heating & cooling
equipment, has agreed to pay $6.2
million to 11 former employees to
settle a lawsuit alleging it demoted
or fired the workers due to their
age. Wall Street Journal (05/12/98)
P. B4.
        Recent EPL Claims

A jury in Polk County, Iowa, has
awarded $80.7 million to a former
United Parcel Service (UPS) manager
who was alleged that UPS retaliated
against her when she complained of
sexual harassment. Human Resource
Executive (04/98) Vol.. 12, No. 5, P. 16
Clark, Kathryn F.
       Recent EPL Claims

Banking firm CoreStates Financial
Corp. will pay $1.48 million to 142
former employees for alleged
unequal pay practices, the U.SU.
Department of Labor announced on
Friday. Washington Post (04/18/98)
P. D3; Berselli, Beth.
          TOTAL CHARGES
          FILED WITH EEOC
100000
90000
                   # OF
80000             CLAIMS
70000
60000
50000
     85


            87


                   89


                          91


                                 93


                                        95
   19


          19


                 19


                        19


                               19


                                      19
           TOTAL MONETARY BENEFITS
    OBTAINED THROUGH EEOC ENFORCMENT

$140,000
$120,000
               (000'S)
$100,000
 $80,000
 $60,000
 $40,000
       85


               87


                      89


                             91


                                    93


                                           95
     19


             19


                    19


                           19


                                  19


                                         19
                                         $25
                                               $75
                                                     $125
                                                            $175
                                                                   $225
                                                                          $275
                                AG
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                                                                                   AWARDS 1988-1995




                  NO
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                                                                                 MEDIAN COMPENSATION




                  LH
                        AR
                             AS
                               S.
Searching For Coverage!

 Commercial General Liability Policies
 Commercial Umbrella Liability
  Policies
 Workers’ Compensation Policies
 Directors & Officers Liability Policies
 Employment Practices Liability
  Policies
       Coverage Under Commercial
        General Liability Policies


An employee’s ancillary
allegations of defamation or
violation of privacy may often
trigger coverage, for personal
injury.
     Coverage Under Commercial
      General Liability Policies



Unfortunately, the recently
strengthened employment-related
practices exclusion is commonly
attached to CGL policies, CG 21
47.
Coverage Under A
Commercial Umbrella Liability Policy

Most Commercial Umbrella Liability
policies are written on a following
form basis, and an employment-
related practices exclusion attached
the underlying CGL policy would be
applicable.
     Workers’ Compensation
     As Exclusive Remedy


Where tort claims against the
employer for personal injury
claims arising from the
employment relationship are
prohibited, that is frequently a
complete defense.
     Coverage Under A
Workers’ Compensation Policy

Unfortunately, in Maryland, Virginia
and the District of Columbia tort
claims against the employer for
personal injury claims arising from
the employment relationship are not
prohibited.
     Coverage Under D&O
     Liability Policies


Employment practices coverage
added to a D&O policy ranges
from being relatively worthless to
being acceptable.
     Stand-Alone Employment
     Practices Liability Coverage


Until relatively recently, there were
no policies on the market which
were designed to provide
coverage for the Employment
Practices Liability “EPL”
exposures.
            EPL Policies
       Who Should Be Insured?

   Parent Organization

   Any Subsidiary Entities

   Directors & Officers, and

   All Employees-past & present
              EPL Policies
      What Events Are Covered?


Most policies cover the staple
wrongful employment practices of
wrongful termination, sexual
harassment, and discrimination based
on protected classes established by
federal or state law.
                EPL Policies
        What Events Are Covered?

Relatively recently, more policies are
covering the so-called workplace torts,
such as defamation, invasion of privacy,
public disclosure of private facts, false
imprisonment, deceit, misrepresentation,
fraud, intentional infliction of emotional
distress, interference with contractual
relationships, and interference with
prospective economic advantage.
           EPL Policies
        Common Exclusions

 Any liability as a result of ERISA or OSHA
 Fraudulent, Criminal, or Malicious Acts
 Liability for an insured who intentionally
  committed an otherwise insured event
 Strikes and Lockouts
 Punitive Damages
              EPL Policies


Because of the complexity of the
subject matter of the EPLI policies,
straightforwardness in what the policy
covers and simplicity in organization
are very important. Policies that are
confusing may only prove to result in
coverage disputes in the future.
          Who are the Leading
            EPLI Carriers?
   American Equity          National Union
   Chubb                    New Hampshire
   CNA                       Insurance Company
   Executive Risk           Travelers Property
   Evanston                  Casualty Group
                             United States Liability
   Lexington Insurance
                              Insurance Co.
    Company
            EPL Pricing

 Minimum Premiums range from
  $1,500 to $10,000, and
 Rates range from $50 to $100 per
  employee based on a number of
  factor, including the number of
  employees and the policy retention or
  deductible.
       Yet Another
  Employment Related Risk



Managed Care Liability
Managed Care Liability
          The Basis of Liability

   Apparent Agency-as long as the employee
    has reason to believe that such a
    relationship existed

   Enterprise Liability-placing blame on the
    enterprise without having to even
    consider the individual practitioner
      Managed Care Liability
       Search For Coverage

 Fiduciary Liability policies may provide
  some coverage, but bodily injury is
  excluded. A future endorsement clearly
  excluding coverage is likely.
 Managed Care Liability policies have
  recently been introduced to address this
  emerging liability for employers.
     Who Are The Leading
  Managed Care Liability Carriers?

 Lexington Insurance Company



 TIG Group
The End

				
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