Hopefully you are an employer with a cohesive team of employees – one for all and all for one! But one rogue employee can ruin it all. Employment Practices Liability insurance is one of the most used professional liability insurance policies today.
This Employment Practices Liability insurance policy covers a wide range of exposures the modern day employer faces. Providing the employer with protection against such acts as wrongful termination, failure to hire, retaliation or failure to promote which caused deprivation of a career opportunity is the function of the Employment Practices Liability insurance policy.
These are among many other actions with or without merit brought against an employer, its officers and directors or supervisory staff. When claims are filed a defense has to be mounted and someone has to pick up the tab. This risk can be transferred to the insurance company with the purchase of an Employment Practice Liability insurance policy.
The policy provides defense costs within the policy limit. Plainly stated your limit of liability purchased is for defense costs and for any settlements paid. The defense costs paid diminish or reduce your policy limit. Wherever possible try to buy defense costs outside of your policy limit. This means the defense costs have a separate limit applicable to defense costs or ideally would be unlimited. As an example – If you have a limit of coverage for $1,000,000 and defense costs are incurred for $200,000 then only $800,000 is available for any settlement that is arrived at. I suggest you always ask for defense costs to be outside the policy limit and unlimited. As with any purchase if you don’t ask the question then the answer is always “NO”.
The Employment Practice Liability insurance policy can have a Hammer clause. Be absolutely certain you understand the impact this clause will have on a claims settlement. Here is how a full hammer, the worst of the lot works. A claim is brought against you for discrimination. The details of the case do not matter. The claim is without merit and your own insurance company providing your Employment Practices Liability insurance coverage agrees with you that it is without merit. However the plaintiff’s attorney has dug his heels in and wants a jury trial for his client.
The attorney representing you and the insurance company providing the Employment Practices Liability insurance offer the plaintiff $100,000 to walk away and the plaintiff’s attorney is most agreeable to this. However youfeel you are the injured party and your reputation is at stake and you refuse to settle. Note that in professional liability claims the insured must give his consent to settlement. The case goes to trial. The plaintiff looks great on the stand and you, the employer, not so much. The jury awards $300,000. How much do you pay?
You are going to pay $200,000 because the insurance company could have settled and walked away for a mere $100,000. You were not agreeable to that as is your right but now you pick up the tab for the difference in what the insurance company could have closed the claim for and what they are going to pay now. That is a full Hammer clause and you just got hammered with it. Some hammerclauses can be “softened” to percentages of 70/30 or 80/20 and some policies donot contain a hammer clause.
One thing all Employment Practices Liability insurance policies have in common is that they are written on a “claim made” policy form. What triggers the coverage is when the claim is made and it must be made within the policy term. In light of this you want to be sure you purchase a policy that has a full prior acts clause. Maintaining continuous coverage…retro-dates…third party liability and wage and hour coverage are important components of this policy.
At EZ Center Insurance Services we are the experts to guide you through the purchase process of this very valuable insurance protection. As you can see it is a complicated coverage with many different nuances. This is not insurance protection you want to go on-line to buy. The average Employment Practices Liability claim settled for around $230,000. This is not an insurance coverage any agent on the street can sell to you. It requires expertise.
EZ Center Insurance Services in Hollywood has been providing Employment Practices Liability insurance to our clients for more than 20 years.