leverage it needs to manage common employment claims and withstand
pressure to settle for “business reasons.” However, with this
type of policy, the monetary amount paid out in any settlement or
award will still be borne by the organization.
WHO IS COVERED?
An EPL policy typically covers two classes of insureds: an individual
and an organization. Where an individual is insured, coverage
extends to the unlawful actions of the insured individual. Where
an organization is insured, coverage captures a proceeding where
an organization is directly implicated in the wrong alleged, as well
as a proceeding where an organization’s liability arises from the unlawful
actions of an employee. This latter circumstance is known as
“vicarious liability.”
WHO MAKES KEY DECISIONS?
Not unlike most insurance arrangements, the insurer – as the ultimate
payer of a claim – generally retains a duty (and the right) to
steer the response to a claim, including deciding which counsel to
appoint, what investigations to conduct and whether to litigate or
settle. Some policies allow the insured to select counsel from a preapproved
roster set by the insurer.
WHEN DOES EPL MAKE SENSE?
In determining whether an EPL policy is right for an organization,
the two key considerations tend to be frequency and size of claims,
and internal resources.
An organization with a high frequency of employment related
claims, whether because of industry norms, size or peculiarities
tied to the organization’s business model, may consider EPL a good
investment. On the other hand, a smaller organization may look
to EPL as a hedge against the risk of a complex or expensive claim
(such as a class action or large wrongful dismissal), which can cause
unsustainable damage.
Similarly, an organization with relatively few internal resources
– for example, where there’s a high ratio of front-line to managerial
employees, or limited (if any) on-site senior-level HR support
(i.e., retail, hospitality) – the workplace may not be sufficiently
equipped to appropriately address workplace issues as they arise.
For this type of organization, EPL coverage may be just the right
kind of “back-stop” should matters go awry.
benefits
THE MOST EFFECTIVE WAY TO
MINIMIZE AN EMPLOYER’S
RISK IS TO HAVE TAILORED AND
EFFECTIVE WORKPLACE POLICIES
AND PRACTICES, ADMINISTERED
BY TOP-NOTCH HUMAN
RESOURCES PROFESSIONALS.
42 ❚ OCTOBER 2015 ❚ HR PROFESSIONAL