Will EPLI (and D&O insurance) respond to COVID-19 related claims?
Employment practice liability insurance policies (EPLI) and directors and officers policies (D&O) in the time of COVID-19 raise new challenges in the insurance industry
COVID-19 left many employers with legal questions during this time. With employers making hard decisions regarding employee safety, remote working arrangements, and how to handle business disruption and potential layoffs.
That raises questions from companies who are asking if their insurance policies will respond to employment-related claims.
First, let's talk about the basic definition of EPLI coverage:
Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers against claims made by employees alleging: Discrimination (based on sex, race, age or disability, for example) Wrongful termination Harassment Other employment-related issues, such as failure to promote
Here is a brief overview of exposures in the workplace environment.
Coverage for Mass Layoffs/Furloughs- Employment Event/Crisis Coverage
Some EPLI and D&O policies provide coverage that businesses can access to assist them with costs associated with significant layoffs. Often called “employment event coverage” under EPLI policies or “crisis coverage” under D&O policies, this coverage is usually written to apply in the event a company lays off or terminates 10-20% of its workforce and sometimes does not have retention.
Wrongful Termination claims
EPLI policies usually cover wrongful termination, retaliation, and discrimination. However, companies MUST make sure they are in compliance with the state and federal laws, so explicit exclusions will not apply. It is imperative for companies considering significant layoffs to work closely with employment counsel to ensure legal compliance with any contemplated layoffs.
Bodily Injury Claims for COVID-19 Allegedly infected in the Workplace
Workers’ Compensation Policies: May apply to claims that coronavirus was acquired in the workplace. Generally, workers’ compensation policies require that the illness “arises out of or in the course of employment.” Thus, causation will be key. Coverage for first responders, including healthcare workers, will likely be available under workers’ compensation policies.
General Liability Policies: May apply to bodily injury claims in cases like:
Company’s negligence led to the exposure and infection of customers/clients
Product liability for air systems in public places or transportation carriers
Restriction of movement (quarantine)
Failure to properly plan for a pandemic
Failure to warn of a known danger
Employer Liability Policies: May apply to bodily injury claims not compensated by workers’ compensation or claims from family members who contract the virus from an employee.
Wrongful Termination/Retaliation Claims
While EPLI policies typically contain explicit exclusions for violations for FMLA violations, wage-and-hour/FLSA claims, and safe workplace/OSHA claims, there is usually a specific coverage carveout for wrongful termination based on retaliation. Thus, companies may have coverage for claims for an employee who asserts he/she was fired because they:
Were forced to work in unsafe conditions (exposure or suspected exposure to coronavirus in the office)
Took family medical leave to assist family members recovering from the coronavirus
Were forced to work from home, change their hours, or quarantine in place
Companies reviewing EPLI and D&O coverage are advised to consult with trusted counsel and their professional insurance agent/broker.
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