A recent increase in coronavirus-related employment practices lawsuits has put Employment Practices Liability Insurance (EPLI) coverage on a pedestal in terms risk management protocols for businesses across the U.S. Although thousands of employers sacrificed profits to ensure best practices were in place for keeping employees safe, many employers still face exposure to risk as more employees have started returning to work while the virus continues to spread. Claims from employers failing to take the appropriate steps to reduce safety risks with COVID-19 concerns are all starting to increase significantly. Employers with workforces returning to the workplace should be sure to evaluate EPLI policies to assess coverage and how they might respond to COVID-19-related EPLI claims.
In this article, we’ll provide a brief recap of the details surrounding general EPLI coverage, identify common scenarios in the workplace relevant to COVID-specific claims and offer various considerations when reexamining current policies.
What Is Employment Practices Liability Insurance Coverage?
EPLI coverage is designed to cover losses an employer must legally pay in connection with claims alleging a "wrongful" company-related act or practice. Many EPLI policies cover similar forms of employer misconduct. However, EPLI in response to a claim will depend on the specific language within the given policy, its exclusions, the allegations set forth by the employee and the damages. Generally speaking, claims could be made for any of the following events:
- Employment Status – EPLI typically covers an employer's alleged wrongful termination, demotion or failure to promote an employee.
- Discrimination – Employees claiming the employer discriminated against them or a supervisor engaged in some form of harassment can trigger EPLI coverage.
- Negligence – Claiming the employer was negligent in adhering to employment-related policies and procedures, such as improper training, can also provoke EPLI coverage.
- Privacy Rights – EPLI may also cover alleged employee privacy rights violations, such as unlawful disclosures of confidential financial or medical information.
Common EPLI Claim Scenarios Due to COVID-19
To protect the health and safety of employees, companies started scrambling to implement remote working policies and procedures at the beginning of the outbreak. As shelter-in-place orders have slowly been lifted, some employees have started returning to work and the increased number of "wrongful" alleged claims against employers have been the result of activities directly related to the pandemic. In unprecedented fashion, all of the below common scenarios are coming to fruition at once.
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Common Scenario
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EPLI Policy Concept
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Employee alleges COVID-19 was contracted at the office due to an employer's inadequate workplace policies.
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Coverage is not typically provided for specific viruses. However, many policies may include "bodily injury" exclusions for physical injury, sickness or disease. In addition, policies may not include losses resulting from violations of the Occupational Safety and Health Act (OSHA) for claims the employer's workers' compensation would protect.
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Employee alleges that an employer failed to provide legally required protective equipment resulting in increased risk of exposure to COVID-19.
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Although a claim alleging an employer took a punitive act against the employee for reporting a failure to reduce COVID-19 risks could be covered, most policies exclude coverage for costs incurred involving disabled persons under the Americans with Disabilities Act (ADA).
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Employee claims that the employer violated ADA privacy rights as a result of disclosing to other employees the employee was COVID-19 positive.
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EPLI policies will often cover alleged invasions of privacy with regards to unlawful disclosures of health or disability information, including the employee's rights under the ADA.
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Employee is discharged for refusing to comply with the employer's COVID-19 protocols to combat the spread of the virus in the workplace.
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Retaliation claims against employees for exercising rights under OSHA laws often times remain eligible for EPLI coverage. However, many policies exclude general claims under OSHA and other employment safety regulations.
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Employee claims that management either misrepresented the severity of certain COVID-19 cases in the workplace or failed to take action to improve office conditions (i.e. not thoroughly cleaning office space).
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EPLI policies are commonly eligible to claims involving negligent hiring, training and/or supervision of senior employees charged with protecting the safety of staff.
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Employee alleges psychological distress due to the employer's policies for returning to the office or due to senior management allowing too many employees to work together in close proximity.
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Certain EPLI policies can indeed cover such claims surrounding mental distress or emotional anxiety, not including the "bodily injury" exclusion.
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Employee is terminated as the result of the COVID-19 economic downturn (i.e. mass layoffs) and files a Worker Adjustment and Retraining Notification (WARN) Act claim for unpaid wages.
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The majority of EPLI policies include WARN Act exclusions. That said, retaliation claims may be considered for eligible coverage.
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Relevant Provisions to Consider for EPLI Coverage
There is no standard Employment Practices Liability Insurance coverage, and terms, conditions and exclusions vary in this market. Whether coverage is available under an employer's EPLI policy for COVID-19-related claims depends on the policy’s specific provisions and the facts surrounding the claim. Employers should review policies to evaluate coverage for COVID-19-related claims and consider whether policy language or exclusions can be improved or added to expand the scope of coverage. Furthermore, employers should be aware of claim reporting requirements. Some considerations include the following:
- Definition of Employment “Wrongful Acts” – To trigger the insuring agreement, a claim must allege an employment wrongful act, which typically includes claims alleging employment-related invasion of privacy or defamation, discrimination, harassment, retaliation or violation of FMLA, all of which appear to be relevant to possible COVID-19-related employment claims.
- Definition of “Loss” – If triggered, the policy pays only covered loss, as defined by the policy. Typically, loss does not include any costs to comply with injunctive relief, costs accommodations associated with disabilities, or other protected status, benefits due, or salary obligations.
- “Bodily Injury” Exclusion – COVID-19 claims could include allegations involving bodily injury. Most EPLI policies contain exclusions for loss related to bodily injury. The scope of applicability to a claim depends on whether the policy excludes claims for bodily injury or whether it excludes all claims arising out of bodily injury.
- “Wage and Hour” Exclusion – Some EPLI policies contain a small defense cost sub-limit. In the absence of that sub-limit, wage and hour claims are largely excluded from EPLI policies unless you purchase special wage and hour insurance products. To the extent that COVID-19 claims arise from certain leave or quarantine measures that impact pay, this exclusion may become relevant.
As COVID-19 circumstances seem to change daily, risk exposure levels for employers is also continuing to evolve. Employers with workforces returning to the workplace should evaluate EPLI policies to assess coverage and how they might respond to COVID-19-related EPL claims. In addition, employers must quickly respond to other implications of COVID-19, including communication procedures with employees. Going forward, it’s reasonable to expect that underwriters will ask for more information in the upcoming renewal cycle relating to COVID-19.
As always, West Town Insurance will continue to monitor this issue and advise our clients accordingly. To learn more, call (252) 368-4967 or email info@westtownins.com.
About West Town Insurance Agency, Inc.
West Town Insurance Agency is a Trusted Choice® independent insurance agency based in Edenton, North Carolina. As an independent agency we represent a number of different companies, and can compare coverage and prices to find the best possible value for your individual or business circumstances. Our agents have over 30 years of combined experience in the insurance industry and are here to help provide the choices you deserve so you and your loved ones can feel safe and secure.
About the Author: Leah joined West Town Insurance in 2015 to manage the overall strategic direction of the agency. She is responsible for oversight of day-to-day operations and specializes in writing and assisting with commercial lines accounts. With over 25 years of experience in the industry, her past roles with another local independent agency include personal lines account manager, commercial lines account manager and agency operations manager. Leah holds an Accredited Advisor in Insurance (AAI) designation from the American Institute for Charted Property Casualty Underwriter. To learn more, email Leah at lfarmer@westtownins.com or call (252) 368-4967.