Introduction to Employment Practices Liability InsuranceEPLI

1
Introduction to Employment Practices Liability
Insurance(EPLI)
Breege Lynn, FinPro, Marsh Ireland July 10th 2008
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Contents

• The Current Climate in Ireland
• The U.S. Landscape and EPL Insurance evolution
• EPL in Ireland - a changing landscape(legislative
  overview and liabilities facing Irish Companies
  today)
• Extent of cover previously available(and why no
  longer the answer)
• Coverage afforded under a standard EPL Insurance
  Policy(standard definitions/exclusions)
• Necessary information for Insurance Underwriters
  to Quote
• EPL Insurance - Making the purchase tangible for
  Irish Companies
• Conclusion

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The Current Climate

• Plenty of Activity since the implementation of
  the EEA 1998 - 2004
• Manager FI, Unfair dismissal/Retaliation - 635k
  settlement
• Golden Vale - 100,000, gender case
• Mater and Rotunda Hospital - 65,000
• Local Newspaper Editor(Limerick) - Unfair
  Dismissal 66,000
• Advertising Firm - Ageism, 35,000 - Ireland only
  country in Europe to specifically forbid
  discrimination on the grounds of age
• Secondary School - Rita Fitzgerald - max. amount
  of compensation to be paid
• AIG currently have one EPL claim on their
  books, expecting to settle for no less than 1m

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The Current ClimateStats from the EA

• The Equality Authority dealt with 2,933 queries
  on the current Employment Equality Acts
• Largest number of these queries came from the
  grounds of gender, race, age and disability
• 404 casefiles opened largest numbers on grounds
  of race, gender, age disability
• Sectors most affected by allegations of
  discrimination
• Govt State Department
• Wholesale and retail sector
• Education sector
• Financial and business services sector

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U.S. Landscape and Employment Practices Liability
Insurance

• Title VII Civil Rights Act 1991 - biggest
  catalyst behind surge in EPL claims
• race, gender, religion, national origin etc.
  Includes same sex claims
• Access to Jury Trials . higher awards
• Compensatory and Punitive damages
• Age Discrimination in Employment Act(ADEA)
• American with Disabilities Act(ADA)
• Family and Medical Leave Act(FMLA)
• .Similar protective legislation now here
  

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History of EPLI

• First Policy created in 1985
• Interest grows in 1992 after amendments to Title
  VII
• Purchasing Obstacles
• Price
• Decision Makers(CFO, Risk Manager, Legal
  Consultant)
• Current Environment Worldwide - legislative
  change in other countries globalisation etc

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Irish EPL Landscape Pre 1998 2004 Acts

• Employment Equality Act 1977 - prohibited
  discrimination on grounds of gender and marital
  status only
• Anti Discrimination(Pay) Act 1974

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The EEA 1998

• Effective October 18th 1999
• Represents radical departure from existing
  legislation .. Why?
• New grounds for discrimination not based on
  gender or marital status
• Family status - Religion
• Sexual orientation - Age
• Disability - Race
• Travelling Community

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EEA 1998 - cont...

• Introduction of statutory definitions of
  harassment and sexual harassment
• New Regulatory Authority - Equality Authority
• Employers - Vicarious Liability
• Onus on Employers to prove employment practices
  not discriminatory
• Certain cases - compensation unlimited (gender
  discrimination).
• Labour Court - costs can not be awarded against
  complainants
• Ireland also subject to EU Directives - works
  council, parental leave etc.
• 2004 Amendments made to cater for EU Directives
  

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EPLI In Ireland

• EPLI addresses specifically, the employment
  related legal actions taken by employees against
  their Irish employers and/or other employees
  including independent contractors in some cases.
• EPLI - not a substitute for good personnel
  practices . but acts as a good safety net for
  your clients or for yourselves.
• The question for any firm is no longer whether it
  will be faced with an EPL claim, but rather when
  it will occur, how much it will cost, and what
  damage it might cause to reputation and brand
  image of the company.

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Extent of Cover previously available in Ireland

• Employers Liability Insurance - trigger is bodily
  injury or disease.
• Legal Expenses depending on profile of client
  may be inadequate due to onerous nature of
  compliance conditions, IBEC procedures, lower
  limits and perceived inflexibility.
• DO - limit of indemnity exists ostensibly to
  protect individuals

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Coverage afforded under Standard EPLI Product

• Broad cover for individuals and the company
  against an extensive list of employment-related
  allegations-
• Wrongful termination
• Workplace and sexual harassment
• Discrimination
• Failure to employ or promote
• Deprivation of a career opportunity
• Negligent evaluation or employment related
  misrepresentation
• Defamation or wrongful infliction of emotional
  distress
• Coverage for a broad array or claims - not just
  lawsuits
• EPLI Polices are Claims Made Policies. Claims
  have to be reported as soon as practicable
  during the policy period.

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Coverage afforded under Standard EPLI Product
cont...

• Written demands for monetary damages
• Civil and arbitration proceedings
• Formal administrative and regulatory proceedings
• Coverage for mental anguish and emotional
  distress claims
• Generally, no prior acts exclusion
• Defence costs tend to be advanced on an ongoing
  basis
• Cover for punitive damages available
• Broad cover for whistle blower or retaliatory
  claims
• No requirement to follow predetermined human
  resource practices as a condition of cover
• Global cover from global companies

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Typical Exclusions found on EPLI

• Cover Excludes
• Circumstances existing prior to the continuity
  date
• Employment-related benefits(as defined)
• Criminal proceedings against the company
• Modifications to buildings to cater for disabled
  employees
• Prior notice and late notice
• Stress exclusions in some policies

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Necessary Information for Insurance Company to
Quote this cover

• For an indication - all you need from your
  client or for yourselves is the name of the
  Company or the Company Registration Number
• To firm up the indication - all you need from
  client or yourselves is a fully completed EPL
  proposal form together with attachments which
  typically include
• Copy of employee handbook
• Copy of employment application form(if used)
• Latest Audited Report Accounts of the Employer
• Claims History including all claims/incidents and
  quantums etc

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EPLI - making it Tangible

• Key considerations for EPL Insurance purchase
• Insurance Companys EPL experience?
• How will the Insurer handle the claim?
• Scope of coverage?
• What other types of Services can the Insurer
  provide?
• Insurers overseas capabilities?

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Conclusion

• Not as onerous as the U.S. but liabilities and
  lawsuits are on the rise in Ireland and likely to
  rise given litigious culture in Ireland
• Prevailing Irish economic climate ..
• Irish Law Firms may be looking to new sources to
  drive their revenue as large volumes of
  litigation work now going via PIAB