With the dog days of summer firmly upon us (and not an interesting Connecticut Supreme Court case in sight to discuss) I’m going to followup on some issues that readers have raised over the last few months. As I indicate to readers, I can’t respond to particular inquiries. I hope, through some of these posts, however, to provide some additional information on various topics. Today’s topic: EPLI, a topic I’ve discussed before.
EPLI — or employment practices liability insurance — has changed the landscape of employment law claims over the last years, for better and worse. And although EPLI has made in-roads with some companies, there are still plenty of others that reject it, either because of cost or for other reasons.
Why have EPLI? Well, I don’t sell insurance, but the reason to have EPLI is the reason we have insurance on our cars, houses, etc. — risk management. But not all companies have the same goals and not all companies can tolerate the same risk.
For that reason, EPLI may be a good thing for a company with a low risk tolerance because it may be able to control costs — particularly in the short-run. EPLI may not be a good bet for companies with a high risk tolerance because they may be able to achieve the same or better results without it. In those instances, getting coverage only in the "bet-the-company" type matters may be a compromise result.
Suppose now that you’ve decided to get EPLI, what factors may you consider?
- Insurance Company Reputation and Directives — Ask around. What is the company’s philosophy on settlement? Will the filing of a claim led to higher rates in the future?
- Who has the Duty to Defend — In other words, does the company select the legal counsel that will defend the company? In general, many EPLI policies provide that the insurer has the duty and will thus dictate the counsel choice, but some companies will give the insurer flexibility. This is key and sometimes overlooked negotiation item.
- Costs — Like most insurance, the costs of the premium will change depending on the deductibles and the aggregate limits. Get an idea of the variables involved and shop around.
- What is really covered — Over the years, the EPLI policies have become more standardized and similar, but differences still remain. Get a firm understanding over who’s is covered and what claims will (and more importantly, will not) be covered. Will wage/hour claims be covered? What about labor union claims? There’s nothing worse than paying for insurance on claims you never get and then not being able to use EPLI for similar (but uncovered) claims.
- How is the case managed? Similar to the Company’s reputation, how effective is the company in handling of claims. In other words, what is the customer service like? Ask the insurer for some referrals to get a sense of this.
- How are renewals handled? Develop an understanding of the rate of renewal for the insurer and the costs involved. This may be a good indicator as to client satisfaction.
This is by no means a comprehensive list, but the more you know about EPLI, the better you will be to make an informed decision, instead of relying on hype and hyperbole.