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Among the many different types of business insurance policies existing today, one of the most common is Employment Practices Liability (EPL) Insurance also known in the industry as EPL insurance or EPLI. EPL policies are designed to provide coverage in response to Claims brought by or on behalf of employees of a Company against the Company or any of its officers, managers, employees, and sometimes others for actual or alleged employment-related wrongdoing. For instance, Claims brought by former Employees of a Company for discrimination or wrongful termination would fall within the scope of coverage of a typical EPL policy.
EPL Policies are not written on an “all-risk” basis. Rather, the scope of coverage is limited to certain specified employment-related perils that are usually listed either in the definition of Claim, Wrongful Act, Wrongful Employment Practice, or similar definition. This list will typically include ten to twelve employment-related perils, such as (1) wrongful termination, (2) employment-related misrepresentations, (3) violation of employment or discrimination laws, (4) employment harassment, (5) wrongful deprivation of a career opportunity, (6) wrongful discipline, (7) employment-related retaliation/whistleblower claim, (8) wrongful evaluation, supervision, training, etc., (9) failure to adopt or comply with proper workplace standards, (10) employment-related defamation, (11) employment-related emotional distress, and (12) breach of employment or employment-related contract. Only those portions of a Claim falling within one or more of these specified perils would be potentially covered under an EPL policy.
Unlike general liability policies, which are written on an “occurrence” basis, most EPL policies are written on a claims-made or claims-made-and-reported basis. That means that coverage under an EPL policy is not triggered until a Claim, which is usually defined as including a civil proceeding, a government proceeding, an EEOC charge, or a written demand for relief, has been made against an Insured. Further, the Claim must have been made against the Insured during the Policy Period, irrespective of when the alleged wrongdoing giving rise to the Claim occurred. Accordingly, coverage may be available for alleged wrongdoing (e.g., the discrimination, termination, etc.) that occurred prior to the inception of the Policy. However, coverage is not available under the Policy unless and until a Claim, as defined in the Policy, has been made against an Insured. Because EPL policies are normally written on a “claims-made” basis, a policy’s definition of Claim is vital in determining whether coverage, including any defense obligation, has been triggered as a threshold matter.
Darius N. Kandawalla is a member of Bailey Cavalieri LLC and a practices in Bailey Cavalieri’s Director and Officer Liability group.
For additional information on employment practices liability insurance, and coverage of other insurance related legal topics, click here to visit Lexis Practice Advisor.