Salvatore Pollaro is vice president of Zurich North America's employment practices liability unit.
Even small firms face serious EPL threats ...
and Zurich North America has solutions
By Elisabeth Boone, CPCU
Salvatore Pollaro is vice president of Zurich North America's employment practices liability unit.
That might happen to a big company ... but it would never happen to us."
"Our staff is like family ... they're loyal through and through."
"Of course we don't discriminate!"
If you've mentioned employment practices liability exposures to your small business clients, you've probably heard at least one of these statements. Many owners of such firms believe that their small size and close "family ties" with employees are an impenetrable barrier to lawsuits alleging discrimination, harassment, or wrongful termination.
Not so, say Sal Pollaro and Jim McHugh of Zurich North America's Management Solutions Group, which recently expanded its portfolio by introducing an employment practices liability policy for entities with fewer than 300 employees. As a leader in the development of EPL coverage for large employers, Zurich's Management Solutions Group is using its knowledge and experience to design coverage for small to mid-sized entities whose owners may not be fully aware of the exposures they face.
When did the Management Solutions Group begin to recognize the need of smaller employers for employment practices liability coverage?
"We've been underwriting EPL since 1994, and we decided early on to handle this product on a stand-alone basis through a dedicated underwriting unit," says Pollaro, who is vice president of the employment practices liability unit. "In 1994 we started with two underwriters and one claims handler, and now we have more than 20 professionals focusing strictly on employment practices liability underwriting and claims handling.
"We found that this level of dedication really allowed us to get closer to our insureds and better recognize their exposures," Pollaro continues. "We always believed we could provide a viable product to the under 300 employees market, but first we wanted to be sure we could deliver the product efficiently to these employers."
Early last year, the Management Solutions Group began to structure programs for small to mid-sized firms. "We decided at that time to partner with key program administrators and distributors who could assist us in introducing the product to the marketplace," Pollaro says. The new product is called commercial EPL, to distinguish it from Zurich's corporate EPL policy for entities with more than 300 employees.
The "unseen" exposure
What are the most significant EPL exposures faced by smaller entities, and how are they similar to, and different from, those that confront large insureds?
"For one thing, on smaller risks we don't typically find class-action or multi-party lawsuits--the kinds of things we're reading about in the newspapers," Pollaro responds. "But we do find that types of claims are pretty consistent across the entire workforce: age and race discrimination, sexual harassment." He points to a key differentiating factor between large and small entities: "In small to mid-sized firms, the human resources role is often handled by an employee wearing two hats, so there may be less awareness of the HR exposure than is the case for larger entities. With more than 20 dedicated individuals analyzing EPL exposures all day, we can bring to the small and mid-sized employer market the benefit of our experience in identifying exposures they may not see as frequently as our larger insureds."
Even for large entities, keeping up with changes in employment law is an ongoing challenge--and for smaller employers, which often have no HR department or dedicated employee, the task is truly daunting. "These laws are changing constantly, and everyone on our staff is responsible for following the changes: EEOC at the federal level, as well as all the state laws," Pollaro says. "We do our best to keep on top of these changes, and I think that's the biggest challenge for many of our commercial insureds."
Jim McHugh is commercial product manager for Zurich North American's employment practices liability unit.
Expressing his agreement, Jim McHugh, commercial product manager, says: "It's clear to me that awareness is one of the biggest challenges smaller employers face: not having a dedicated HR specialist to keep up with law changes, and not having the experience of dealing with many claims. Larger companies may get these claims frequently, but smaller companies may not know what action to take and how to manage the claims process. These claims don't age well, and the sooner an employer reacts to one, the better off everyone is."
Coverages and more
Modeled on Zurich North America's successful EPL product for the corporate market of larger employers, the commercial policy for entities with fewer than 300 employees provides comprehensive coverage as well as access to risk management information and support.
The policy covers claims made by or on behalf of employees of the insured that allege a wrongful employment act, wrongful termination or treatment, discrimination for any protected classes, harassment, and common law violations. Coverage features include:
* Marital/spousal extension
* Global coverage
* Severability as respects application and exclusions
* Bilateral discovery
* Prior acts
* Coverage for common law violations regardless of any underlying claim
Excluded classes of business are:
* Law firms
* Municipalities or other government entities
* Schools
* Temporary help firms and professional employee organizations
* Political organizations
* Churches/religious organizations
* Technology
Limits of liability up to $1 million are available on a primary basis; retentions can be set at $5,000, $10,000, or $25,000. Optional enhancements include punitive damages coverage and third-party coverage.
"We've been able to simplify the underwriting process by providing an online rating system," McHugh remarks. "For firms with fewer than 100 employees, all we need is a completed application and claims history, submitted by the independent agent to one of our program administrators. For more than 100 employees, we also ask the employer to submit its current HR policies and procedures."
The commercial EPL product is available to independent agents through five select program administrators (see sidebar).
The Management Solutions Group works with its program administrators to encourage independent agents to discuss EPL exposures with their small business clients and to present the commercial EPL policy and services as a solution.
Risk management tools
In developing the commercial EPL policy, McHugh says, "We looked at the marketplace, and we worked with agents to find out what the specific issues were for smaller employers and what they wanted from an insurer. We discovered that these employers were looking for risk management tools to reduce exposures but weren't always sure how to access them. To meet this need, we began to offer two services: the Best Practices Risk Management LineTM and the online Bureau of National Affairs, Inc. (BNA) Employment Guide."
The Best Practices Risk Management Line provides up-to-date risk management consultation via telephone to help insureds manage their workplace risks. The service is provided by full-time AGOS attorneys, who have extensive experience in employment law. There is no limit to the number of calls an insured may make.
The online Bureau of National Affairs Employment Guide is a one-stop reference to help small business owners and managers understand their basic responsibilities as employers in the areas of HR management, benefits, and payroll. The guide addresses a wide range of issues related to employment management. It contains model forms, checklists, and policy information to help the employer create a company handbook that addresses such topics as harassment, EEO, and Family Leave. In addition to the reference sections, the guide includes current and archived issues of the Bulletin to Management, a newsletter that provides practical tips and HR news that affects day-to-day business. The contents of the Employment Guide are updated weekly. Both the guide and the Best Practices Risk Management Line are available to insureds on a complimentary basis.
A look into the future
Trying to anticipate the future in the small employer EPL marketplace is a dicey proposition, because the market is so strongly affected by ongoing changes in the legal environment. "At the time we entered it, the marketplace for small employer EPLI was highly fragmented, and it continues to be so today," Pollaro comments. "EPLI is offered by a lot of carriers with different provisions and limits as well as value-added services like loss control. One thing I can say with some degree of certainty is that we'll see more consistency in the product and loss control services provided to the small employer as this market continues to develop."
At Zurich, he points out, "Our biggest steppingstone into the marketplace was recognizing the need for awareness and education and becoming a partner through the whole process, as well as just a policy provider." *
ZURICH COMMERCIAL
EPL PROGRAM ADMINISTRATORS
Allrisks Limited
Timonium, MD
Contact: Karen Kutger
Phone: (410) 828-5810, Ext. 3503
Fax: (410) 828-8179
E-mail: kkutger@allrisks.com
Blais Excess and Surplus
Agency of Texas, Inc.
Contact: Mark Swope
Phone: (512) 894-3460
Fax: (512) 858-1266
E-mail: swope@blaisexcess.com
Cedar Hill Insurance
Scottsdale, AZ
Contact: Andrew Atsaves
Phone: (480) 951-4177
Fax: (480) 951-4266
E-mail: aatsaves@cedarhill.com
Crump of New Jersey, Inc.
Contact: William Dixon
Phone: (732) 634-8770
Fax: (732) 634-8760
E-mail: william.e.dixon@crumpins.com
J&N Insurance Services
Kent, WA
Contact: Joe Suor
Phone: (866) 430-1886
Fax: (253) 854-2262
E-mail: joesuor@uswest.net
For more information:
Zurich North America
Management Liability Solutions
Phone: (866) 860-7292