Employment Practices Liability (EPL) policies provide coverage to an insured for allegations of harassment, discrimination, wrongful termination, retaliation, etc. This coverage is considered to be “first party” coverage, because it covers claims being brought against the insured from their own employees. Almost all EPL policies cover directors and officers, management personnel, and employees as insureds. The definition of “employee” in the policy is typically broadened to include full-time and part-time employees, leased workers, volunteers, etc. But what about claims that don’t come from your employees? How are these claims covered?
There is a separate insuring agreement contained within the EPL policy that covers liability claims brought by non-employees (or a third party) against employees of the insured. The third party coverage protects the organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers. Every EPL policy is different, some policies automatically include coverage, and other policies charge an additional premium for the coverage.
Organizations that are heavily customer oriented, such as retail stores, restaurants or auto dealerships, are most exposed to third-party liability claims. On the other hand, organizations not involved in customer interaction such as manufacturers are not nearly as exposed to these kinds of claims. However, even organizations that do not have a lot of client interaction still may have a third-party exposure, third-parties could also be vendors, janitorial staff, a technician to fix a copy machine, etc.
It is also important to remember protecting your organization from third-party claims doesn’t just stop at purchasing the coverage. Organizations must also implement policies and procedures that address discrimination and harassment issues, both from the standpoint of an employee’s actions as well as the actions of third parties. Most organizations already have these policies and procedures in place. The majority of EPL carriers require some type of policies and procedures in place before binding a policy.
Once policies and procedures are in place, it is important to adequately train employees on these topics. New employee orientation programs should always include a presentation outlining the organization’s harassment/discrimination policies. Training should also be provided to HR personnel on how to report and handle third-party claims. Frequent “retraining” sessions should also be provided to employees to ensure effectiveness and that the internal policies and procedures are adequately being followed.