Lawsuits challenging employment practices—such as wrongful termination, discrimination, harassment and privacy violations, as well as claims under federal and state employment statutes—have been escalating in recent years. For instance, the number of new individual charges received by the U.S. Equal Employment Opportunity Commission (EEOC) has reached about 100,000 for each of the past three years, reflecting a consistent increase of over 30 percent from the number of new charges in the prior years. The EEOC itself also obtained some $365 million from the private sector in relief through various recovery programs in both 2011 and 2012, $50 million more than in 2010 and the third consecutive year of increased recoveries.[2]
Similarly, the number of suits filed annually under the Fair Labor Standards Act (FLSA) has more than tripled in the past 10 years.[3] Given the recent hike in employment-related claims, courts nationwide increasingly have been wrestling with a range of complex coverage issues arising under employment practices liability insurance (EPLI) policies.
EPLI policies typically are issued on a claims-made (or claims-made-and-reported) basis, which means that the policies potentially cover claims resulting from specified wrongful employment acts or omissions that are first made against the insured during the operative policy period. One common issue is whether the circumstances surrounding the allegedly wrongful employment practices constitute a claim and, if so, when such claim actually was first made and gave rise to a reporting obligation by the insured. Other recurring questions include whether the conduct at issue and the relief sought are covered “wrongful acts” and “loss” under the EPLI policy’s insuring agreement. In addition, there are interesting questions concerning the doctrine of inferred intent and knowledge exclusions sometimes found in EPLI policies. As discussed below, insurers and insureds alike can expect to see these issues arise more frequently in claims for coverage under EPLI policies.