Bank Insurance - Employment Practices Liability Insurance
By Scott Simmonds, CPCU, ARM, CMC

An employee claims to have been harassed by a supervisor. A teller discharged for chronic customer service complaints claims age discrimination. An unsuccessful job applicant claims he didn’t get the job because of his race. These are all liabilities included in employment related practices insurance. The topic was touched on briefly in the D&O section, as coverage can be included in that policy. We’ll go into more detail here.

The policy is designed to address liabilities that come out of the employment relationship. Workers' compensation and issues involving unemployment and ERISA are excluded.

Coverage is generally included for: harassment, discrimination, wrongful discharge, failure to hire, and failure to promote.

No Standard Policies
As there are no standard EPLI policies. Each policy and proposal must be evaluated on its own merits.

Claims-Made Policy
See the separate article describing claims-made policy issues.

Limit of Coverage
Most EPLI policies have a limit per occurrence and a policy limit of coverage for the total of all claims, called an aggregate limit. As claims are paid, you use up the limit of coverage available for future claims.

Defense Within Limit
Most EPLI policies include the cost of defending a claim (attorney’s fees, etc.) within the policy limit of liability. The defense costs of a claim can use up your insurance. When looking for the correct limit of coverage consider the cost of the legal system in your calculations.

Definition of Wrongful Employment Practice
Each EPLI policy will include a definition of the wrongful acts that are included in the policy.

Here are some acts to be considered when reviewing coverage:

Discrimination
Negligent Hiring
Wrongful Discharge, Evaluation, Discipline, Promotion
Employment Related Personal Injury (libel or slander)
Sexual Harassment
Workplace Harassment
Failure to Hire
Workplace Tort – Wrongful termination, retention, etc.

If an act is outside the definition of wrongful act, there is no coverage.

Definition of Harassment
Some policies narrowly define coverage as “sexual harassment.” A better (broader) definition is “workplace harassment” or “harassment including sexual harassment.”

Special Insurance Company Provisions
Some employment practices liability insurance policies include special features. Usually these are measures to prevent losses. Insurers may provide access to a “hot-line” allowing free access to experts to discuss employment actions and situations. The purpose is to give the bank access to information and opinions on issues that could lead to a claim.

Another feature offered by some insurers is a reduction in the deductible applied to a claim if the bank called an attorney prior to the termination of an employee. Some insurers provide a hot-line. Others allow you to call your own attorney. Should a claim result, the deductible is reduced by half.

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