errors and omissions insurance How Third-Party EPLI Coverage Works | Axis Error & Omission
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How Third-Party EPLI Coverage Works


How Third-Party EPLI Coverage WorksA Look at Third-Party Employment Practices Liability Insurance

Employee-related lawsuits are prevalent throughout every industry segment and for companies of all sizes. That’s why today Employment Practices Liability Insurance (EPLI) needs to be a part of every firm’s insurance solution. EPLI is designed to provide coverage in the event of claims filed by past and potential employees alleging wrongful termination due to issues related to discrimination and harassment, among others.  Not only will the coverage respond because of alleged wrongful termination, but it also extends to not hiring an employee for a position if discrimination allegations are made. Defense costs associated with these claims as well as indemnification if an employer is found liable are covered under an EPLI policy. Even if a claim is completely untrue, a firm still needs to defend itself, which makes Employment Practices Liability must-have coverage for all companies.

Some policies can also be designed to provide third-party coverage to protect an organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers. In addition, some EPLI may cover wrongful acts committed by third parties against the insured’s employees. If your business or organization has a great deal of interaction with the public, it may be especially vulnerable to third-party claims, such as allegations of discrimination and sexual harassment. Discrimination claims may allege discriminatory practices against a person based on their race, religion, age, sex, national origin, disability, pregnancy or sexual orientation. Harassment claims allege unwelcome sexual advances or requests for sexual favors. Such acts include verbal and physical conduct, and other forms of harassment that create a hostile or offensive work environment.

In some cases, EPLI carriers may not provide third-party coverage to firms with a high potential for claims. These firms can include, for example, restaurants, country clubs, medical facilities, schools, religious institutions, the entertainment industry, and the legal and real estate professions. Instead, insurance companies might offer limited coverage, such as covering accusations of discrimination, but not harassment claims.

One important provision to review when it comes to third-party EPLI insurance is how a policy treats accusations involving the violation of the Americans with Disabilities (ADA). Most policies don’t provide third-party coverage in this case, because they define a claim as a “demand for monetary damages”. This can present an issue with regard to an ADA claim because many of these claims are asking for reasonable accommodations in the workplace, not monetary awards. It’s important, therefore, to review your policy’s definition of a claim and whether it includes claims for non-monetary damages. A policy with this expanded definition will cover defense costs and indemnity connected with an ADA claim, but will not provide the funds to bring your organization into compliance with the provisions of the law.

To find out more about EPLI insurance and the need for third-party coverage, please contact the professionals at Axis Insurance Services. We specialize in Employment Practices Liability insurance coverage and can design a policy that is right for your organization or business. Give us a call at (877) 787-5258.

Source: Property/Casualty 360

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Blogged on: September 8, 2014 by Mike Smith
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