Wednesday, October 26, 2011

Why You Should Actually Read Your Employment Practices Liability Insurance Policy

Important safety tip: all of you with EPLI insurance should run, do not walk, to where your policy is stored, and read the policy carefully. Pay particular attention to the scope of coverage, because if it says you are covered for charges or lawsuits brought against you by an employee, you are not going to be covered in a suit brought by a federal agency, such as the EEOC. At least, that's what Cracker Barrel discovered recently, to the tune of $2 million plus.

What happened in the case was that 10 current or former employees brought employment discrimination charges against the company over a period of several years. The EEOC consolidated the charges into one lawsuit, and transformed it into a wide-ranging class-action. Years later, the case settled for some $2 million in damages and more than $700,000 in attorneys fees.The company's EPLI insurer refused to pay the settlement, citing language in the policy that defined a covered claim as "a civil, administrative, or arbitration proceeding commenced by the service of a complaint or charge, which is brought by any past, present or prospective employee(s)."

The court backed the insurer, noting that the plain language of the policy does not apply to litigation brought by a federal agency, which is clearly not a "past, present or prospective employee" of the company.

So, a quick suggestion-make sure your EPLI policy covers not just actions brought by current or former members of your workforce, but also addresses those situations where your company is the luckless target of federal, state, or local agency legal attention.

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