Locations: Florham Park, NJ and Marysville, PA

NJ Employment Practices Liability Insurance

(EPLI)

It is very important for all business who have employees purchase Employment Practices Liability Insurance (EPLI).  Coverage can be provided as a stand-alone policy or included in one of our outstanding packages.

Many times the claim against an employer is unfounded, however the defense costs are high.  By purchasing an Employment Practices Liability Insurance Policy (NJ) both the attorney’s defense costs and settlement will be covered.  Policy limits can be $100,000., $250,000., $500,000., or 1 million.

Employers can be sued for . . .

    • Wrongful termination of employees
    • Discrimination
    • sexual harasement
    • Personal injury arising out of employment practices
      Personal injury is defined as: False arrest, detention or imprisonment, malicious prosecution, wrongful eviction from / into and invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies by or on behalf of its owner, landlord, or lessor, oral or written publication of material that slanders or libels a person or organization, etc., or disparages a person’s or organization’s goods, products, or services oral or written publication of material that violates a person’s right of privacy.
    • Any other unfair employment practices, including but not limited to:
    • Wrongful failure to promote, or employ
    • Negligent supervision of hiring
    • Negligent evaluation
    • Failure to employ or promote
    • Deprivation of career opportunity
    • All discrimination acts
    • Wrongful disclipline or demotion
    • Wrongful termination
    • Wrongful infliction of emotional distress
    • Negligent performance or evaluations
    • Employment related misrepresentation
    • Mismanagement of employee benefit plans

Federal laws that address employment liability include:

  • Title VII of the Civil Rights Act of 1964 and the Civil Rights Acto of 1991, which amended Title VII for the claimant and gave claimants the right to jury trial
  • The Family Medical Leave Act
  • The Age Discrimination in Employment Act (ADEA)
  • The Americans with Disabilities Act (ADA)

Third-Party EPL Claims
In recent years, a number of nonemployees (most often customers, clients, and vendors) have made nationally publicized claims alleging harassment and discrimination. In one widely publicized case, when a Starbucks restaurant asked some individuals who merely wanted to use the restroom to leave, it was alleged that they were discriminated against because of their race. (Starbucks has since changed its policies.) Harassment and discrimination are covered perils in EPL policies, but EPL policies were not originally intended to cover harassment and discrimination claims made by people who are not employees.  However, EPL insurers have responded to the expanding nature of this exposure by offering what are known as “third-party liability coverage endorsements.” Such extensions significantly change the nature of EPL coverage. This is because the endorsements broaden the scope of EPL policies so that they now
cover harassment and discrimination claims, despite their lack of an employment nexus. The types of claims noted in the previous paragraph (claims made by nonemployees based on the actions of employees) are precisely the type that third-party liability coverage endorsements attached to an EPLI policy are designed to cover.

Third-party liability should be distinguished from suits by employees that are caused by the acts of a third party. For example, suppose an employee is a waiter in a restaurant where the required “uniform” for female servers consists of revealing clothing. The employee sues her employer, alleging it has created a hostile work environment because the employer fostered an atmosphere in which customers were encouraged to make suggestive remarks about her body. In this case, the employee, not a third party (like a customer), has sued the employer. The suit is not a third-party suit.

Why Third-Party EPL Claims Are a Problem
Third-party non-employment-related liability claims are a problem for two reasons: (1) such coverage is not provided by CGL policy forms, and (2) most EPL policies, while they do not specifically exclude such claims, do not cover them either.  CGL policies do not cover third-party non-employment-related claims because such claims normally do not allege a covered injury as defined by CGL policies. Specifically, harassment and discrimination, the allegations made in nearly all third-party non-employment-related claims, do not fall within the scope of “personal injury” or “bodily injury” as defined by CGL policies.

Third-party non-employment-related liability coverage is not provided under EPL policies unless the policies are endorsed. This is because, under most EPL forms, coverage is provided only for claims made by an “employee” as defined by the policy. To date, no EPL insurer has included customers, clients, vendors, or similar categories of nonemployees within its definition of “employee.”

Third-Party Liability Coverage Endorsements
Third-party non-employment-related liability coverage is available only by adding an endorsement for which additional premium is usually charged. The rationale for providing third-party non-employment related coverage by endorsement, rather than within regular EPL policy provisions, is that the extent of organizations’ third-party exposures varies widely, depending upon the nature of their businesses. For some insureds, third-party non-employment-related coverage can be added for no additional premium.  However, for firms whose contact with the public is significant (e.g., restaurants, consumer financial institutions, auto rental companies), the additional premium can range from 10 to 20 percent of the basic
EPL policy

Please call us to discuss your needs. 973-377-6100