Employment-related practices losses are a broad category of claims that Commercial General Liability coverage forms specifically exclude. They include discrimination cases where one individual is treated differently than another because of race, gender, age or other factors that should not affect one's ability to perform a particular task. Sexual harassment cases arise from a work environment that becomes unbearable because of a requirement to engage in sexual activities in order to keep a job or be subject or a party to sexually suggestive situations unrelated to job requirements.

Wage and hour disputes are a current major cause of action. This could be considered cheating an employee out of earned compensation and revolves around both overtime and working hours without compensation. Some cases involve individuals placed in “salaried” positions and exempt from overtime pay who are then forced to work additional hours to accomplish their assigned tasks. Other cases involve hourly employees who work extra time and “choose” not to report it for a number of reasons.

The EPLI marketplace has many companies willing to write the coverage. Our experts listed AIG, CNA, Zurich, USLI, Admiral, Monitor, Chubb, ACE, Berkley Companies, Colony, Markel, Essex, Travelers, Hartford, Houston Casualty, Evanston, Crum & Forster, Lloyds, Darwin and Ironshore as just a few of the companies actively writing this coverage at the present time. Darryl A. McCallin, vice president of Rockwood Programs estimates the number at between 50 and 55 different carriers.

Who should buy EPLI coverage? According to Marla Donovan, vice president, product development at Burns & Wilcox, “Anybody who has at least one employee should consider buying this coverage.” The experts all echoed this response. Ms. Donovan continues, “Given the current social and political climate, it behooves all employers, not just businesses, but schools churches and other non-profits to consider this coverage.”

According to Robert Cap, products line leader, EPLI, non-profit D&O, tenant discrimination at Markel, the key exposures EPLI covers are wrongful termination, discrimination (race, gender, sex, pregnancy, disability) and failure to pay overtime wages. Linda Deiss, vice president, AVRECO, adds harassment to the list. Ms. Donovan includes permitting an offensive and/or hostile work environment and retaliation to round out the list.

Mr. McCallin explains, “Claims are initially filed with the EEOC or other federal, state and local agencies. Civil litigation is often filed after these proceedings on all levels. Coverage is provided for judgments, statutory attorney fees, settlements – including punitive damages where insurable – up front pay and back pay."

Coverage is written on a claims made basis and can be on a stand alone basis or combined with other coverages. It is common to see directors and officers coverage and EPLI combined because both offer management protection. Some carriers offer endorsements to commercial general liability policies. It is important to consider the impact of the combination on the client’s entire account and whether the limits are combined into a single aggregate.

Not all coverage is equal and our experts pointed out a number of exclusions that should be avoided. Mr. Cap identifies FLSA, wage and hour, common law torts, and gender identity and expressions as unacceptable exclusions. Ms. Deiss was particularly concerned about deliberate acts exclusions and retro-dated coverage. Ms. Donovan adds punitive damages and leased, seasonal or temporary employees’ exclusions. Mr. McCallin mentions the failure-to-make-partner exclusion and third-party exclusion.

Since some policies are more restrictive than others, it is very important to consider enhancements. Our experts shared enhancements they believe are readily available. Ms Deiss includes punitive damages, third party coverage, wage and hour defense, and privacy coverage. Ms. Donovan identifies a waiver of deductible that is provided when a ruling of no liability is made against the defendant. Mr. McCallin mentions a broadened definition of wrongful employment acts that includes retaliation and full prior acts.

Most coverage is written with defense included within the limit but Mr. Cap states that Markel offers defense outside the limit. Mr. McCallin indicates that supplemental defense costs are included for up to a $million limit with some of his carriers.

The experts state that a variety of limits are readily available. Capacity does not appear to be a problem. Limits up to $2 million are fairly common and limits ranging from $10 million to more than $25 million are available.

The geographic limitations are not significant. However, Ms. Donovan states, “In areas where there are high jury awards (and those areas change all the time), EPLI is more carefully underwritten and there is less available capacity." Ms. Deiss notes that the geographic concern “on a worldwide basis is the USA, especially California.”

The experts agree that the market appears to be hardening, with modest premium increases expected in 2009. However, everyone is cautious as to how long the harder market will remain and the extent to which it will harden.

The EPLI marketplace is very dynamic. Mr. Cap explains, “We have seen several carriers withdraw from certain classes, presumably due to adverse loss development“ He also believes that the Lilly Ledbetter Act will lead to an explosion of litigation and “from an employer’s perspective, the timing could not be worse, as most of them are limiting their resources and will struggle to handle new claims.”

While litigation following EPLI type actions may be inevitable, there is another way to limit claims. Mr. McCallin explains that Rockwood is providing a one-stop HR management system to its customers because compliance is becoming very difficult. He believes that this type of value-added service and others like it to improve procedures may become the main source of growth in the market.

In a perfect world, employees are free from discrimination, unequal pay, harassment and hostile work environments. Until then, EPLI coverage is not only desirable but absolutely necessary.