Exclusively from Foa & Son
We routinely recommend Employment Practices Liability insurance for our clients. If you have employees you are subject to a myriad of employment related laws and regulations. The bigger you are, the more employees you have, the more onerous the regulations, and the bigger the chance of running afoul of one of them, or at least being accused of that. And that points to one of the key benefits of employment practices liability insurance. Even if you are blameless in the most mundane of complaints, the cost to defend yourself can be substantial. These policies pay not only for judgements or settlements, but for the cost of defense.
There is a catch (this is insurance, there is always a catch). These policies almost always have a provision requiring timely reporting of claims. What’s a claim? That will be defined in the policy, but in general it’s usually pretty broadly defined. Any written communication that makes a demand of almost any nature can be a “claim” for policy purposes. Any communication from a regulatory agency, like the EEOC or local equivalent, is a claim. Even verbal demands or threats of litigation can be considered a claim. Why is this important? Let’s say you get an EEOC notice about an employee complaint. You know the case is bogus, the employee would have no chance of prevailing based on information you have, and you just handle the issue internally, without noticing the insurance company. A few months later the case blows up, and you have a major claim on your hands. You report it to the insurance company. A few days later you get a letter, saying in effect, thanks but no thanks, you failed to comply with policy provisions and report this claim timely, you’re on your own.
Sometimes claim declinations based on late reporting stick, sometimes they don’t. Either way, it’s an avoidable headache. You need to have a procedure in place to identify potential claims and report them promptly to the insurance company. Claims reported on a “record only” basis comply with policy claim reporting provisions, avoiding that problem. At the same time if they never develop into anything real, or close out for nuisance value within your deductible or retention, the insurance company makes no payment and there is no adverse effect on your loss experience.
Employment Practices Liability policies are all nonstandard policies, with each insurance company writing their own form, and terms and conditions (including claim definitions and reporting requirements) can and do vary. You need to understand what yours says, It’s not difficult to establish a procedure that avoids problems in this area. We’ll be happy to help you with that.