Back-to-Work Preparedness Includes Your EPL Policy

 This blog post can also be found on our COVID Return-to-Work Page.

Every board member I know is thinking about the post-COVID workplace. The challenges are profound, and there is a lot of opportunity for management to end up with serious employment-related litigation. In this post, my colleague Jon Janes addresses these concerns and discusses steps management can take to optimize the response of a company’s employment practices liability insurance. —Priya

As the number of people vaccinated against COVID-19 increases and the number of COVID-19 cases decreases, employers are beginning to bring employees back to the office. This brings additional risk to employers at a time when many are still dealing with ongoing COVID-related litigation following the onset of the pandemic when employers furloughed and terminated employees and adjusted to the new work environment. COVID-related complaints steadily rose throughout the pandemic and may continue to rise as courts and government agencies work through their case backlog.

When it comes to bringing employees back to the office, the additional risks employers face include:

• Deciding who returns to work: Are employees being brought back in a non-discriminatory manner? Who returns first? Are employees required to return?
• Making the workplace safe: Will employees be required to wear masks? Will vaccinations be required or incentivized for all employees or just a subset? Are employee privacy concerns and medical choice decisions being addressed?
• Making reasonable accommodations for employees: How will employers address an employee’s request to continue working from home because they have heightened risk if COVID-19 is contracted? What happens if an employee decides to not be vaccinated because of religious or medical reasons?

Employers will undoubtedly have to make difficult choices to address these risks while trying to address the concerns of all their employees. This may lead to litigation by employees who feel unfairly impacted by their employers’ return-to-work policies. While the total number of EEOC charges fell from FY2019 to FY2020, the number of disability claims, which can include allegations by an employee that their employer did not make a reasonable accommodation, increased. Employment Practices Liability (EPL) insurers believe that accommodation claims related to COVID-19 contributed to this increase in disability charges made to the EEOC and even more will follow as employers bring employees back to the office.

EPL Policy Issues

Now is the time to make sure your EPL insurance coverage is ready for your employees to return to the office. Some high-level policy issues you will want to consider include:

• How broad is the definition of wrongful employment act? EPL policies require that a named wrongful act be alleged in a claim to trigger coverage. This is different from D&O and other policies that only require an act, error, or omission to trigger coverage. You want your policy to have a broad list of named wrongful employment acts to help ensure that coverage is triggered in the event of an employee complaint. I recommend that list include discrimination, including discrimination in violation of the Americans with Disabilities Act and similar state, local, and foreign laws and statutes; retaliation and non-sexual harassment; or hostile work environment. I also recommend that the definition include bullying, wrongful acts alleged to have occurred utilizing social media (even if after hours on personal devices), and invasion of privacy based on public dialogue and sensitivity regarding the COVID-19 vaccines.
• How does your EPL policy address requests for reasonable accommodations? EPL policies generally do not pay for the cost of making a reasonable accommodation for an employee with a disability. A well-crafted EPL policy can, however, provide a defense for a claim by an employee seeking such an accommodation. This will be addressed in the definition of Loss or within the exclusions section of the EPL policy. Review any exclusionary language to ensure that it is crafted as narrowly as possible to maximize recovery for defense costs for this type of claim.
• What exclusions could impact coverage?
  • Bodily injury: EPL policies typically exclude bodily injury claims. However, asking the carrier to provide language that (1) secures coverage for damages arising from mental anguish and emotional distress from a wrongful employment act, and (2) makes sure that the bodily injury exclusion does not exclude claims for personal injury like invasion of privacy, where available.
  • Workers’ Compensation and WARN Act Violations: EPL policies generally exclude claims related to workers’ compensation and WARN Act Violations. I recommend securing affirmative coverage for alleged retaliation related to an employee filing a workers’ compensation claim or reporting an alleged WARN Act violation, if insurers will provide.
• Can I select my own attorney? Selection of counsel is not a COVID-19-specific EPL issue but an important issue that should be addressed when negotiating EPL coverage regardless of the circumstances. Some EPL insurers allow companies to select their own counsel, subject to an agreement on rates and other parameters.Many other EPL insurers require companies to use panel counsel or assigned counsel and use their buying power to reduce hourly rates. It is a good idea to understand how choice of counsel works with your policy. EPL insurers are extremely reluctant to allow companies to select their own counsel once a claim has been filed if not previously agreed to in the policy. In addition, many EPL carriers routinely limit the amount they will pay for counsel at a rate that falls well below the rates charged by more prominent law firms.

Changing EPL Insurance Carriers

The impact of COVID-19 and related litigation has made many EPL insurers adjust their underwriting and seek higher premiums and retentions. Many EPL buyers, who are also feeling the impact of COVID-19, may seek out alternative EPL insurers to reduce their front- or back-end costs. It makes sense to consider your alternatives while you are in your renewal process. If you are considering a change in EPL insurers, you will want to consider taking the following steps to the extent possible:

• Align the old and new definitions of claim. EPL policies are claims-made policies, and the definition of claim is different among EPL insurers. This can cause a gap in coverage if your new EPL insurer has a broader definition of claim, and they take the position that an incident fell under the prior policy given the new policy’s definition. Unless you elected to purchase an extended report period on the old policy, you may be left without coverage for the event.
• Understanding what is prior and pending litigation. Most new policies will exclude “prior and pending” litigation. The question is what is considered prior and pending litigation by the new policy. For example, are investigations—such as an OSHA investigation—considered a prior and pending matter even though an OSHA investigation is not typically a covered wrongful employment act? Are demands prior and pending litigation or just written demands? Other traps for the unwary include having to provide a new warranty or accept a prior and pending litigation date to secure coverage.

Determine what circumstances should be noticed as a potential claim. You may consider noticing circumstances that could give rise to an EPL claim to your old policy if the new policy will exclude the circumstances, does not offer as broad of coverage, or has a higher retention to list a few reasons.

For example, if the new insurer has a reduction in force exclusion, you may consider reporting a RIF as a circumstance that could give rise to a claim on the old policy to preserve coverage on that policy for any future claims arising from the RIF. Pay attention to the specificity required to report circumstances so that they are accepted.

You must also evaluate how your new insurer treats previously noticed matters. They are likely excluded but are they excluded only if the matter was accepted by the prior insurer? Finally, if a specific event exclusion is being added, how broad is the wording?

As life returns to "normal" and your employees return to the office, make sure your EPL coverage leads the way. A quick review of the policy will help you determine how these issues are addressed and potential opportunities to tighten up coverage to the extent improvements can be secured from insurers.