Frequent exposure of employees to wrongful acts by employers while on the job has led to the creation of new federal legislation safeguarding the employee who is a victim of sexual harassment, wrongful termination or discrimination.
By Wallace L. Clapp, Jr., CPCU
Frequent exposure of employees to wrongful acts by employers while on the job has led to the creation of new federal legislation safeguarding the employee who is a victim of sexual harassment, wrongful termination or discrimination.
The adoption of the 1964 Civil Rights Act set up the mechanism to process civil claims against employers, but it was not until the amendment of that legislation in 1991 that claims by employees began to explode. The Equal Employment Opportunities Commission became the clearinghouse for many claims alleging sexual harassment, wrongful termination and discrimination.
Public pressure also arose because of the widespread publicity stemming from the Justice Clarence Thomas appointment hearings and his alleged sexual advances to an assistant, Anita Hill.
Prior to the early 1990s employees who were wrongfully treated on the job were told to keep silent or lose their job. Executives and supervisors committing such wrongful practices, if they were caught, were told to refrain, and the matter was not dealt with further.
New federal laws such as the amended Age Discrimination in Employment Act, the Americans with Disabilities Act of 1992, the Family and Medical Leave Act of 1993, and other federal, state and local laws affecting civil liabilities have increased the liability exposure of employers to suits for alleged injuries brought on by sexual harassment, wrongful termination and all forms of discrimination.
Since the litigation explosion of the 1990s, it has been made quite clear that the basic general liability policy does not cover "wrongful employment practices." Along with the development of the law the specialty insurance industry has developed a form of insurance, employment practices liability insurance (EPLI), to meet the need. The policy is the "hottest" product in the specialty lines field.
Early in 1998, the Insurance Services Office will introduce a standard form of this policy, which may be used by those insurers that have not yet adapted their own form of this coverage.
Specialty market
The market for EPLI coverage still appears to be increasing every day. At least 60 facilities have been identified in the 1998 (the latest) edition of The Insurance Marketplace. Some of these are excess and surplus lines brokers or managing general agents that are using a number of companies writing EPLI to offer a variety of coverages for the sophisticated insured.
We have made a search of the marketplace and have received information from a number of insurers on their EPLI policies. The following, in alphabetical order, is a description of the market.
AIG Morefar Marketing, Inc., 501 Carr Rd., Wilmington, DE 19809; (302) 761-5600; fax (302) 761-5604 or (800) 664-5299(John Foerster). The policy covers federal, state and local laws, as well as the employment practices statutes of the Americans with Disabilities Act but does not cover the cost to accommodate statutes. Limit of liability is up to $10 million/$10 million. The facility writes insureds with 500 or fewer employees with the exception of temporary help agencies and employee leasing companies.
The coverage is marketed countrywide to agents and brokers. Underwriting companies are member companies of American International Group. Granite State Insurance Co., New Hampshire Insurance Co., Lexington and American International Specialty Lines Insurance Co. are used. The policy is written on a stand-alone basis.
A new endorsement broadening the coverage has been introduced. This endorsement modifies the "willful failure to comply with the law" exclusion, rewords the ADA exclusion to clarify that damages, costs or expenses incurred by an insured in accommodating any disabled person pursuant to the ADA are excluded. Exclusions related to retaliation acts, consequential loss and reorganizing/downsizing actions or facility closures are deleted. The endorsement also broadens the definition of discrimination to cover termination, demotion or failure or refusal to hire or promote an individual on any basis which is in violation of statutory or common law.
A Preferred Professional Liability Enterprise, Inc. (APPLE), 132 Nassau St., 6th Floor, New York, NY 10038; (212) 608-4505; fax (212) 608-4505 (Mark F. Diette). This company provides a monoline policy to for-profit insureds of no more than 50 employees. Law firms are not eligible. Applicants with prior claims also are not insured. Limits of liability range from $100,000/$100,000 to $1 million/$1 million. This facility serves agents in all states; most states are admitted. Underwriting companies are Colonia Insurance Co., Reliance and Lloyd's.
"Discrimination" is defined as failure to hire or employ an applicant; failure to promote or reinstate; demotion of or termination of any employee because of race, color, creed, national origin, gender, sexual orientation or preference, marital status, sex, religion, age, military service, disability or handicap, pregnancy, or any other basis prohibited by federal, state or local laws or exercise of a right of the employee to any workers comp, disability benefits, social security, unemployment compensation, COBRA, ERISA, Family Medical Leave Act or similar law.
Bailey Special Risks, Inc., P.O. Box 768, Hendersonville, TN 37077-0768; (615) 264-3977; (800) 768-RISK; fax (615) 264-3980; e-mail: jedwards@baileyrisks.com; URL: http://www.baileyrisks.com (James W. Edwards, CIC). This office represents 12 markets writing EPLI. The premier form used is underwritten by Evanston Insurance Co. This policy covers violations of any workplace discrimination act whether federal, state or local. In addition, the form covers violations of the Family and Medical Leave Act and the Fair Labor Standards Act and any workplace common law tort.
Limits vary from market to market, but the office can provide limits in excess of $50 million. Facilities are available in any state and can cover any type of risk regardless of size or nature of operations. Stand-alone forms of coverage are recommended.
Burns & Wilcox Ltd., 30833 Northwestern Hwy., Ste. 200, Farmington Hills, MI 48334; (248) 932-9000; (800) 521-1918; fax (248) 932-9046 (Steve Allen, senior vice president). This firm writes EPLI in all states through a number of companies. Underwriting companies include Evanston, Lexington, U.S. Liability, Lloyd's of London, Chubb, Employers Re, Executive Risk Specialty and Scottsdale. Limits vary by company, but in-house availability exceeds $50 million.
The policy may be written on a monoline basis or in combination with general liability or D&O. This depends on the company.
Centurion Corp., P.O. Drawer 959, Hanover, NH 03755; (603) 643-2000; (800) 258-3056; fax (603) 643-2740; e-mail: tom@centcorp.com. URL: http://www.centcorp.com (Tom Canfield, vice president). This company acts as a broker for Chubb, Executive Risk, Reliance, Genesis, Gulf, National Union, Zurich American and Fidelity & Deposit insurance companies.
Limits are available to $25 million. Coverage is usually written on a monoline basis but can be combined with a D&O contract. Available to agents in all states.
Delaware Valley Underwriting Agency, Inc., 420 S. York Rd., Hatboro, PA 19040; (Judy Klingerman, AAI.)(215) 443-3500; (800) 388-0215; FAX: (215) 672-7983. E-mail: info@dvua.com. This managing general agency writes EPLI for all classes of business. The coverage is offered on a surplus lines basis, and as long as Delaware Valley or the producing broker has the proper licensing, business can be written throughout the U.S.
Limits or liability range from $100,000 to a maximum of $10 million, $15 million or higher, depending on the market used. A variety of companies are used, including Evanston Insurance Co. The coverage can be written on a stand-alone basis or as an endorsement to the D&O policy.
Executive Risk Management Associates, 82 Hopmeadow St., Simsbury, CT 06070-7683; (860) 408-2200; (800) 432-8168; fax (860) 408-2288; e-mail: info@execrisk.com; URL: http://www.execrisk.com (Ed Piontek). This company writes EPLI for all types of risks in all states on an open brokerage basis. Coverage is written on a monoline basis as well as in combination with D&O insurance.
Wrongful acts are defined as actual or alleged (1) wrongful termination, (2) discrimination, (3) harassment, (4) retaliation, or (5) workplace tort. "Discrimination" is failure or refusal to hire any person, any failure or refusal to promote, the demotion or discharge, employment-related defamation, wrongful failure to grant tenure, or limitation, segregation or classification of employees or applicants in a way that would deprive any person of employment opportunities or otherwise affect the employee's status because of race, color, religion, age, sex, national origin, disability, pregnancy, sexual orientation or preference, or other status protected by any applicable federal, state or local law.
"Harassment" is an unwelcome sexual advance, request for sexual favors, or verbal, visual or physical conduct of a sexual nature made as a condition of employment, used as a basis for employment decisions that interfere with performance, or that creates an intimidating, hostile or offensive working environment. "Workplace harassment" is a harassment of a non-sexual nature.
"Retaliation" is retaliatory treatment against an employee because of the employee's exercise of rights under law. "Workplace tort" is employment-related misrepresentation, negligent evaluation, wrongful discipline, or wrongful deprivation of career opportunity.
Limits are available from $500,000 to $25 million. Underwriters are Executive Risk Indemnity (admitted) and Executive Risk Specialty (nonadmitted).
First State Management Group, Inc., 150 Federal St., Boston, MA 02110-1753; (617) 526-7792; Fax (617) 526-0612. (James C. Seward, CPCU, RPLU, senior underwriter.) This surplus lines managing underwriter writes EPLI for all employer risks, except law firms, leasing/temporary agencies, municipalities and subsidiaries of foreign owned companies.
Coverage is available in all states on a nonadmitted basis using Pacific Insurance Company, Ltd., paper. Limits are available up to $5 million. The policy is written on a stand-alone basis.
The policy's broad definition of "wrongful act" includes the following employment practices: (1) wrongful dismissals, discharges and terminations; (2) wrongful failure to employ or promote, including the failure to grant tenure; (3) wrongful discipline; (4) violations of any employment discrimination law, whether federal, state or local; (5) violations of any workplace harassment law; (6) breach of any employment contract; (7) negligent evaluation or supervision of employees; (8) defamation, invasion of privacy; (9) infliction of emotional distress.
Donald Gaddis Co., Inc., 150 S. Wacker Dr., Ste. 600, Chicago, IL 60606; (312) 853-0071; fax (312) 853-1033 (Christopher Gaddis, vice president). This office writes EPLI for all forms of employers' risks except for governmental entities. The company represents various carriers and offers coverage for all discrimination acts, the ADA, Family Medical Leave Act, Fair Labor Standards Act, independent contractors or leased employees.
Defamation, invasion of privacy, false imprisonment intentional infliction of emotional distress, limited contractual, negligent supervision or hiring, punitive damages, labor arbitration, retaliatory discharge, downsizing, non-monetary relief and benefits are covered damages.
Limits of liability vary from $100,000 for very small employers to $5 million and higher for larger employers. The firm operates primarily in IL, IN, IA, MI, MN and WI. Other states will be considered. The policy is written on a brokerage basis. The firm is not an MGA or managing underwriter for any one market. The policy is written monoline as well as in combination with D&O.
Kemper Insurance Cos., One Kemper Dr., Long Grove, IL 60049-0001; (847) 320-4134 (Pat Gould). This company writes EPLI as either a monoline form or in combination with other lines of business. The coverage is available to a wide range of companies. Ineligible risks are auto dealers, accountants, law firms, medical professions, health care services, government entities, employment agencies and leasing firms, and oil and gas companies.
The policy protects employers from a variety of actions including wrongful refusal to employ, wrongful demotion or discipline, wrongful termination, failure to promote, sexual harassment, defamation of character, libel or slander and invasion of privacy. Discrimination is covered for race, creed, color, etc., as well as sexual orientation, medical condition and arrest records.
Limits range from $100,000 to $5 million. The policy also gives employers free legal consultation, newsletters, seminars and training on employment issues. The policy is written in all states through American Manufacturers Mutual, American Motorists, American Protection and Lumbermens Mutual Casualty admitted paper.
Monitor Liability Managers, Inc., 2850 W. Golf Rd., Ste. 800, Rolling Meadows, IL 60008-4034; (847) 806-6590; fax (847) 806-6282; e-mail: dlucas@monitorgroup.com; URL: http://www.monitorgroup.com (Derek Lucas, EPLI product manager). This managing underwriter writes EPLI for corporations, partnerships and limited liability corporations with 50 to 1,500 employees. The policy is available to agents in all states through an affiliated company, Admiral Insurance Co. Limits are available up to $5 million.
The policy includes coverage for (1) employment-related harassment due to sex, religion, age or national origin; (2) employment discrimination, including all classes protected by federal, state or local laws, and including employment-related defamation; and (3) wrongful employment practices relative to hiring/firing, promoting/demoting, retaliation and defamation.
NAS Insurance Services, Inc., 16633 Ventura Blvd., Ste. 500, Encino, CA 91436; (818) 382-2030; fax (818) 382-2040 (Richard Robin, vice president). This firm was the first to offer employment-related liability insurance in the form of coverage in defense of wrongful termination, sexual harassment and discrimination claims. This coverage was developed by Lloyd's under-writers before the first truly EPLI policies were introduced in 1991.
The company targets all businesses with 3 to 2,000 employees. The policy is available nationwide on a nonadmitted basis except in IL and KY, where the policies are admitted. Limits range from $50,000 to $2 million.
The insurance is underwritten by certain underwriters at Lloyd's.
The policy applies to claims (lawsuits, binding arbitration, written demands for payment, or charges) with the U.S. E.E.O.C. or state or local agency responsible for administration of fair employment practices laws. The policy covers alleged discrimination based on race, religion, age, sex, national origin or disability or other class protected by federal, state or local laws.
Philadelphia Insurance Cos., One Bala Plaza, Ste. 100, Bala Cynwyd, PA 19004; (610) 617-7900; (800) 759-4961 (Ext. 7762); fax (610) 617-7940; URL: http://www.phlyins.com (Jamie Maguire). Covers private and public companies with between 100 and 1,000 employees. The company does not write auto dealers, lawyers or health care facilities.
All major E.E.O.C requirements relating to sexual harassment, wrong-ful termination and discrimination are covered. Limits are available to $10 million. The companies are licensed in all states except LA.
Professional Managers Inc., 2 N. Riverside Plaza, Ste. 2360; Chicago, IL 60606; (312) 466-4955; FAX (312) 559-0167. URL: http://www.webpmi.com. (Brian Van Cleave.) Firm writes EPLI as an endorsement to E&O policies issued by the General Star Indemnity Co. (miscellaneous E&O, accountants, insurance agents and lawyers).
Limits are available up to $1 million in excess of the deductible starting at $2,500. The EPLI limit is a separate limit and is not affected by E&O claims.
"Discrimination" is defined as the failure to hire an applicant or the failure to promote, the demotion of, or the employment-related defamation of any current employee because of race, color, creed, national origin, sexual orientation or preference, religion, age, gender, disability or handicap or pregnancy.
Professional Risk Co., 600 University St., 2501 One Union Square, Seattle, WA 98101-1129; (206) 621-8808; fax (206) 682-9176 (Patrick R. Campbell, executive vice president). This managing underwriter writes EPLI small to mid-sized employers with between 25 and 500 employees. All classes are eligible except public entities, law firms, employee leasing and hospitals.
Limits range from $1 million/$2 million to $5 million/$5 million. PRC is an exclusive underwriting manager for EPLI on behalf of Fireman's Fund. PRC is a division of Wexford Underwriting Managers. Coverage is available in all states, except ME, TX and VT.
The company has developed and implemented the concept of packaging risk management services with EPLI. These services include a review of the insured's human resources practices and procedures, unlimited toll-free consulting, and a quarterly newsletter with the latest employment law news. Optional training in the areas of harassment, wrongful discharge and discrimination is also available.
Professional Underwriters Agency, Inc., 2907 Butterfield Rd., Ste. 320, Oak Brook, IL 60521-1197; (630) 575-8111; fax (630) 575-0033; e-mail: ram@puainc.com (Ram Chandarana). This firm writes EPLI on a monoline basis for all classes of risks except employee leasing companies. The policy covers wrongful employment practice which means employment termination, discrim-ination and sexual harassment. Also covered is wrongful discipline, depriv-ation of a career opportunity, failure to grant tenure, negligent evaluation, and any other basis prohibited by federal, state or local law.
Limits of liability are available to $5 million each claim and in the aggregate. The coverage is available in all states except ID and NH. The firm is acting as the managing underwriter for the American Equity Insurance Co., Scottsdale, AZ (A+ Class VIII), as of November 1, 1997.
Rockwood Programs, Inc., 228 Philadelphia Pike, Wilmington, DE 19809; (302) 765-6020; fax (302) 764-5477 (Mary Preston Brown). This managing general agent writes all classes of business except employee leasing companies. Coverage is for wrongful acts including discrimination, harassment and wrongful termination.
Limits range from $250,000 to $5 million. The coverage is available in all states and is underwritten by the Gulf Underwriters Group. The policy is written on a stand-alone basis only.
The coverage form eliminates the downsizing and retaliatory acts exclusions and contains a broad definition of claims. The form offers punitive damages coverage.
SMIS, a Van-American Co., 2 Riverchase Office Plaza, Ste. 208, Birmingham, AL 35244; (205) 985-7511; (800) 755-7647; fax (205) 403-0761 (Teresa L. Freeman). This broker writes EPLI insurance for all types of employer risks.
The company services agents in all states. Limits of liability range from $250,000 to $5 million. Coverage is provided on a monoline basis. The firm also can provide markets that write D&O and EPLI together.
The firm's main market covers wrongful employment practices with respect to (1) wrongful termination; (2) violation of the Family and Medical Act; (3) violation of any federal, state or local civil rights or anti-discrimination laws; (4) violation of the Fair Labor Standards Act; and/or (5) commission of a common tort arising out of and in the course of employment except to the extent that the tort allegedly results in bodily injury or property damage.
Travelers Property and Casualty, One Tower Square, 3PB, Hartford, CT 06183; (860) 277-3915; fax (860) 277-3930; e-mail: robert_j_schueler@travelers.com (Robert J. Schueler, EPLI portfolio manager, bond department). The company writes the Traveler's Employment Practices Liability PLUS+sm policy which features the following highlights:
"Wrongful employment practice" addresses the overwhelming majority of federal and state employment practice regulations.
The definition of the critical insuring agreement term, wrongful employment practice, includes: wrongful termination; discrimination; protected status harassment; retaliation; sexual harassment; breach of employment agreement; employment-related misrepresentation; wrongful failure to employ or to promote; wrongful discipline, denial of training, deprivation of career opportunity, denial or deprivation of seniority, failure to grant tenure, evaluation; invasion of privacy; employment related defamation, related infliction of emotional distress. The policy covers punitive damages.
The company targets primary coverage for companies with up to 2,000 employees; excess coverage, for over 2,000 employees. The company services growth industries, e.g., software development, retirement services, bio-tech, mail order/catalogue companies, domestic pharmaceuticals, systems integrators, manufacturers and wholesalers, e.g., plastics, glass products, food products, surgical instruments, select consumer products, machinery; and business services, e.g., data processing, computer maintenance, credit reporting, mailing services.
Limits of liability range up to $2 million for primary, but the company will consider higher limits on a case-by-case basis. Market capacity is up to $25 million. The coverage is offered on a countrywide basis. Most states have approved at this time with filings pending in the rest.
The company does not use managing general agents but has 42 underwriting offices countrywide with local claim handling. The coverage is written on a monoline basis.
Each insured receives, for no additional charge, a copy of the Risk Management PLUS program, created specifically for Travelers by Labor Consultants of America, a leading employment practices risk management firm.
This program has three com-ponents: (1) collective response; (2) training of front-line managers and supervisors; and (3) sample policies and procedures, e.g., employment-at-will, sexual harassment, equal employment opportunity, pregnancy discrimination, anti-drug, to be adopted by employees.
Tudor Insurance Co., 400 Parson's Pond Dr., Franklin Lakes, NJ 07417-2600; (201) 847-8600; fax (201) 847-1746 (Pauline Morley). This company writes all types of entities with the exception of auto dealer-ships, franchise operations, law firms, municipalities, oil and gas firms, schools, temporary help or worker leasing firms. The policy is available in all states through appointed wholesale brokers. No managing general agents are used. The policy is written on a monoline basis. Limits are available to $1 million.
Employment practices covered under the policy include: wrongful refusal to employ a qualified applicant; wrongful failure to promote; wrongful demotion, negligent evaluation, reassignment or discipline; wrongful termination of employment, including retaliatory or constructive discharge; harassment, coercion, discrimination or humiliation as a consequence of race, color, creed, national origin, marital status, medical condition, gender, age, physical appearance, physical and/or mental impairment, pregnancy, sex, sexual orientation or preference; or oral or written publication of material that slanders, defames or libels an employee, or violates the employee's right of privacy.
USF&G Executive Portfolio Group, P.O. Box 1138, LA-0209, Baltimore, MD 21203-1138; (800) 664-8734 (William M. Carroll). This company's policy provides coverage for claims involving various state employment laws, including but not limited to: (1) Americans with Disabilities Act, (2) Age Discrim-ination in Employment Act, (3) Fair Labor Standards Act, (4) Title VII of the Civil Rights Act of 1964, (5) Civil Rights Acts of 1886, 1871, 1982, 1983, 1985 and 1991, (6) Equal Pay Act, and (7) Family and Medical Leave Act.
The company targets employers with up to 1,000 employees. Limits are available up to $5 million. The policy is available in all states except CT, LA, ME, MD, MN, NH and OK. The insurance is issued on USF&G paper through the company's own agents and a select group of wholesalers. The policy is written on a stand-alone basis, but may be added as an endorsement to the D&O policy.
United States Liability Insurance Group, 1030 Continental Dr., King of Prussia, PA 19406; (610) 688-2535; (800) 523-5545; fax (610) 688-4391 (John G. Donahue, Jr., RPLU, marketing director). This company has just introduced a new EPLI policy. It is the first in the marketplace to offer defense costs outside of the limit of liability. This feature is written for insureds that purchase limits of $500,000 or more. Policy limits are available to $2 million/$2 million.
The program is designed for companies with up to 200 employees. The underwriter is Mt. Vernon Fire Insurance Co. or U.S. Liability Insurance Co. The policy is available through the company's appointed wholesale agents but is not available in AL, DC and LA. The policy is written on a stand-alone basis.
Excluded classes of business are broadcasting companies, casinos, coal mines, colleges and universities, construction companies, general contractors, entertainment industry, federal contract companies, government agencies, hospitals, law firms, municipal risks, nursing homes, restaurants, security guard services, steel mills and temporary/employment agencies.
There are no exclusions for retaliatory discharge, violations of the WARN Act, or mental anguish/emotional distress.
J. M. Wilson Corp., 8036 Moorsbridge Rd., Portage, MI 49024; (616) 327-4130; (800) 666-5692; fax (616) 327-4131 (Marilyn Schmidt, e-mail: marilyn_schmidt@jmwilsin.com or Karen Stites, e-mail: karen_stites@jmwilson.com). The company writes EPLI for employment risks of up to 1,000 employees.
Liability limits are written up to $1 million. The firm services agents in IL, IN, MI, OH and WI. The policy is written monoline or with D&O. Underwriters include Evanston Insurance Co., Tudor Insurance and Mt. Vernon Fire.
The policy covers: vicarious liability for intentional acts; independent contractors/leased employees, FMLA, FLSA, USERA, defamation, invasion of privacy, false imprisonment, inten-tional infliction of emotional distress, interference with contractual rela-tions, deceit, fraud and or misrep-resentation, negligent supervision or hiring and all discrimination acts. There are no exclusions for labor arbitrations, punitive damages, retaliatory discharge, downsizing, non-monetary relief.
Zurich-American Insurance Group, One Liberty Plaza 53rd Floor, New York, NY 10006; (212) 748-2375; fax (212) 513-1239 (Lisa L. Reynolds, executive assurance dept.). The company writes EPLI for all classes of business. The policy covers: (1) wrongful termination or treatment, including constructive discharge and whistleblower as well as failure to promote, demote or any adverse changes in employment; (2) discrimination for any protected classes pursuant to federal, state or local laws; (3) harassment including hostile environment against any protected class, as well as quid pro quo and hostile work environment for sexual harassment. Policy covers claims arising out of or attributable to layoffs.
Zurich makes available up to $50 million in liability limits. The policy is written in all states. It is a stand-alone policy but can be offered as part of blended programs with other coverages. The underwriting company is Steadfast Insurance Co., a nonadmitted insurer member of the Zurich Group.
Zurich-American offers at no charge loss control services, which include the Hotline fax service and the Employment-Labor Law Audit (ELLA). *
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