Monday, November 24, 2014

Employment Practices Liability Insurance: Drawing a Line

The United States of America, has always stood for equal opportunities in employment, and creating a safe workplace for the community of employees. Similar to several other areas of labor and employment related issues, the United States of America, has been a shining example of how legislation can be used to enforce good practices and prevent acrimonious incidents at the workplace. Some of the landmark legislations in this domain include:
  • 1964: Title VII of the Civil Rights Act
  • 1967: ADEA (Age Discrimination in Employment Act)
  • 1990: ADA (Americans with Disabilities Act)
  • 1991: Civil Rights Act
  • 1993: Family and Medical Leave Act (FMLA) 
These laws are interpreted and enforced by the EEOC (Equal Employment Opportunity Commission) of the Federal Government.

However, use and abuse of laws exist in every sphere of life and the law governing the safety and equal opportunities for employees is no exception. These laws have, unfortunately, opened up a whole slew of employment related lawsuits. It has been reported that between 1999 and 2003, there were as many as 403,000 law suits filed under various laws and subsections, by employees, with the EEOC. Needless to say, some of these claims were groundless, but nevertheless extremely expensive to defend or settle.

That is why, in the last couple of decades, one of the insurance products that is increasingly being favored, is the Employment Practices Liability Insurance (EPLI). EPLI is a type of liability insurance that covers wrongful acts arising at the workplace and provides protection from claims against them. These generally cover:
  • Sexual harassment at the workplace
  • Discrimination on various grounds such as gender, age, physical disability, compensation & benefits, genetic traits, nationality of origin, pregnancy, race, color, religion and retaliation for whistle-blowing, among others
  • Wrongful termination from employment
  • Breach of employment contract
  • Negligent or improper evaluation
  • Refusal to employ and/or failure to promote
  • Wrongful norms for workplace discipline
  • Wrongful infliction of emotional distress
  • Inappropriate workplace conduct
  • Defamation
  • Invasion of privacy
EPLI aims to protect Managements of the businesses from groundless claims brought about by disgruntled employees. The coverage also includes:
  1. Perceived issues: Although there may not be an intention to create a wrongful act, gaps in age, generation and communication gaps can create a perception of wrong-doing.
  2. Legal conflicts between employees and contractors, vendors, customers, partners and clients.
  3. Deliberate damage or injuries inflicted by the company’s employees without the Management’s consent or knowledge.
The policies cover Directors, Officers, Management personnel, and employees as insured. However, most EPLI policies generally exclude coverage for:
  • Punitive Damages
  • Fair Labor Standards Act Violations
  • Certain Americans With Disabilities Act Claims
  • Employee Retirement Income Security Act (ERISA) Violations
  • Consolidated Omnibus Budget Reconciliation Act (COBRA) Violations
  • Occupational Safety and Health Act (OSHA) Violations
  • Intentional Institutional Claims (such as retaliating against a whistle-blower)
  • State Employment Law Violations
The cost of EPLI coverage is a complex matter and depends on the nature of business, size of the company (number of employees), past history of lawsuits and claims made against the company. The policy will reimburse the insured company against the defense costs which is the cost of defending the lawsuit in court, as well as, the settlement amount. It also covers legal costs, irrespective of the outcome. 

Allied Brokers is a full-service insurance brokerage firm and has been providing insurance cover throughout California, under various categories since 1954. We understand EPLI thoroughly, having handled many such claims. We will guide you through the intricate terms, conditions, details and caveats that govern EPLI. We provide policies that are optimally-priced and offer the kind of coverage that is required, keeping your best business interests in mind. 

Thursday, November 20, 2014

Understanding Professional Liability Insurance Coverage

What is it?
Professional Liability Insurance (PLI), also called Professional Indemnity Insurance (PII) or Errors & Omissions (E&O) is a type of liability insurance, created for professionals who are in the consulting and/or services business. This prevents these types of professionals from having to bear the full cost of defense, in case a client files a negligence lawsuit against them, and/or the cost of the damages awarded to the client in case of a civil lawsuit.

Who requires it?
While this is not an exhaustive list, PLI/PII covers doctors, lawyers, insurance agents, property dealers, agents & brokers, investment advisors, financial service providers, architects, structural engineers, construction specialists, electricians, plumbers, software developers, website developers, application developers, software architects, project managers, business administrators, quality control / quality assurance consultants, Testing analysts, business analysts, transporters, etc. NGOs and non-profits.

Why is it so important?
Earlier, there was only the General Liability Insurance which covered physical harm caused to a person or property, as well as wrongful advertising. Then, as services companies became larger, there were other, newer forms of insurance which covered the employers, the public, the product, etc. But most of the consultants or service providers mentioned above rarely cause physical or advertising injuries. The claims are more in the nature of misrepresentation, negligence, bad faith, unfair business practices and incorrect advice. Hence, a newer form of Liability Insurance had to be created. Not having this cover can expose these consultants/service providers to expensive lawsuits, loss of reputation, and closure in some cases.

What does it cover?
PLI generally covers claims made during the policy period for any form of negligence, error or omission that may have occurred on part of the consultant/service provider. It rarely covers claims for these lapses that have occurred in the period preceding the start of the liability period, unless specifically mentioned in which case, it’s called a retroactive policy.

Does it cover Civil Liability Insurance?
A typical PLI does not cover criminal prosecution or civil liability cases, including, but not limited to suits such as defamatory, contract violations, warranty breaches, IP (intellectual property) violation, cost of doing business, etc. Exceptions to this insurance coverage, for technology providers, made are for internet security, data breach, data loss/theft, etc. These sets of suits are generally covered separately or are covered by exclusive contracts for each of them.

Can it be customized?
Since each service business is unique with its own inherent risks and intricacy of service provided, PLI contracts are generally customized to the nature of the business. So a PLI for people in the medical business is different (called as malpractice insurance) from an errors and omissions contract for lawyers, financial service consultants, investment advisors and insurance agents. Any good insurance company will provide profession-specific PLIs.

Can I have a PLI only for a specific contract?
PLIs generally apply to the individual and are not specific to a particular contract. However if a particular contract expects you to have a PLI, Insurance companies can provide such coverage. Many government and corporate contracts expect consultants to have a fairly high-value PLI before they can bid for a contract. In such cases, Insurance companies will process the PLI on a need basis.

How do I get started?
Allied Brokers, a long entrenched and experienced provider of insurance coverage in the Bay area, is also a trusted name for personal insurance, business insurance and health insurance. All you need to do is to pick up the phone and call us today on the listed numbers and a senior advisor will talk to you in depth.