Employment Practices Liability Insurance is misunderstood. Some companies think it simply pertains to sexual harassment or wrongful termination. They also think that since these kinds of offenses are “blatant” they don’t need to have an Employment Practices Liability Insurance policy or that their current insurance provides sufficient coverage. They may be wrong.
Abercrombie & Fitch Case and the Employee Handbook
As evidenced by the recent Abercrombie & Fitch Supreme Court case, Employment Practices Liability Insurance is extremely important. The Supreme Court ruled 8-1 that the retailer violated workplace discrimination laws when it turned down a Muslim job applicant wearing a hijab. Though hats were banned in their employee handbook, termed the “look policy,” Abercrombie & Fitch now is liable for the event. Even if you have the greatest employee handbook in the world, defending your company in a case such as this one can cost you a lot of money, and put your reputation at risk, if you don’t have a properly structured Employment Practices Liability Insurance policy.
What does a well-written Employment Practices Liability Insurance Policy Look Like?
A well-written Employment Practices Liability Insurance policy usually provides the insured with the consent to settle. But there typically is a caveat saying that if you don’t offer that consent because you want to continue to fight it, that’s on your dime, not the insurance company’s. This is known as the “hammer clause.” You should work with your broker to make sure this clause isn’t in your policy. This way, if you do incur additional defense costs, you’re covered. Ultimately, you want to make sure your insurance company won’t be able to walk away if you want to appeal a settlement.
What Can I do to Protect my Business Beyond a Policy?
In addition to making sure your policy is structured properly so your insurance carrier is there to cover defense costs should you need them to, take advantage of the available loss control resources many of them provide. For example, some insurance carriers offer online tools for you to use so you can educate your employees. Your carrier may also have a hotline, which can be useful for smaller companies that don’t have a dedicated labor law attorney. These hotlines can provide companies with legal advice as incidents arise. This can help prevent these situations from snowballing into lawsuits.
Employment Practices Liability Insurance is for more than sexual harassment and wrongful termination, and it should be part of any comprehensive insurance program. But you need to make sure your policy is written so it provides you with the best coverage possible. Your broker can help you do this, and he or she can also make sure you’re taking full advantage of the available resources many insurance carriers provide.
Philadelphia, PA, 19102
