November 21, 2016 Articles

Employment Practices Liability Insurance Policies

Exploring the interplay between recent employment law developments and coverage issue

by Teresa Lewi [1]

The ever-shifting employment law landscape across the United States continues to present significant challenges and liability risks for companies. In light of significant employment law changes from 2014 to 2016, companies’ liability risks are projected to grow over the next few years—making employment practices liability insurance (EPLI) policies all the more consequential. As noted in a September 2014 report, lawsuits against employers related to their employment practices “have been on the rise as more employees are aware of their rights, and media coverage has publicized many high profile employment disputes.”[2]

Companies that are faced with employment lawsuits can expect to incur substantial costs and may spend years defending such lawsuits. Defense costs regularly range from $200,000 to $300,000 per lawsuit, which often take between 18 to 24 months to resolve.[3] While employment lawsuits are often initiated by a current or former employee, federal, state, and city agencies will frequently file claims on behalf of an employee or group of employees as well.[4] EPLI polices, which are designed to provide coverage for allegations of wrongful employment-related acts, are still evolving products that have not been the subject of as much coverage litigation as numerous other types of policies. For policyholders—particularly companies employing workers in New York or California, which have the most employee-friendly laws[5]—matching the scope of their EPLI coverage to the types of litigation exposures they are likely to face will continue to take on greater importance. As discussed below, recent employment law trends indicate that EPLI coverage options will continue to evolve as the types of EPLI claims become more diverse.

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