76 HR MAGAZINE SEPTEMBER/OCTOBER 2018
DOES MY INSURANCE COVER THAT?
PRICES MAY VARY
The price of EPLI has increased signifcantly since 2011 compared to other liability lines, according to Advisen. From the
frst quarter of 2011 through the third quarter of 2017, it rose
about 30 percent, compared to a 12 percent rise in the cost
of directors’ and ofcers’ liability insurance and a 4 percent
decline in general liability insurance.
The price will often depend in part on your organization’s
claims history and the insurer’s estimate of the strength of its
employment practices. EPLI, which generally covers claims
made by former employees and job applicants as well as current employees, must be renewed every year.
The cost is also contingent on the retention, or deductible. If you’re not sure whether you need EPLI, you can
dramatically reduce the cost by increasing the retention
from $5,000 to $50,000, for example, thereby covering
only very large claims.
The availability and terms of EPLI haven’t really changed
since the #Me Too movement began—at least not yet. “A lot of
insurers are uncertain if we are in a new world given the events
of the last months, and many typically do not react to these
events right away, particularly given there have not been a lot
of #Me Too claims yet,” says Richard Betterley, an insurance
industry consultant who publishes the Betterley Report, an
annual analysis of EPLI coverage trends and policies.
But if there is an uptick in such claims, and insurers start
to believe the world has indeed changed, they may withdraw
from the market rather than raise their premium prices. They
might conclude that they won’t be able to charge enough in
premiums to insure against risk of a $10 million loss, Betterley
says. The 2017 Betterley Report notes that EPLI in California
is already difcult to fnd, given losses in the state.
Some insurers scrutinize different industries and, in
some cases, will not cover those that pose undue risks,
including professional services, hospitality and enter-
tainment, Betterley notes.
Because policies are underwritten on an annual basis and
can vary signifcantly from year to year, it is important to
ask an insurance specialist to re-examine a policy’s coverage
annually and compare it to alternatives in the market, says
Vikki Stone, senior vice president at Poms and Associates
Insurance Brokers in Los Angeles. “I shop all clients every
year,” Stone says. “We try to fnd the best terms and pricing,
and sometimes the incumbent is not the best.”
But sometimes there are advantages to sticking with your
carrier, especially if you have a clean history. “Generally, we try
to not move around, in part because there are some price con-
siderations if there have been no claims on a policy,” Stone says.
Unless you have specialized knowledge of the insurance
industry, it’s best to rely on brokers and consultants to competently perform that type of analysis, Betterley says.
Usually, under an EPLI policy, you’ll be required to give notice within a defned period that a worker or former employee
is threatening a suit. Upon reviewing the incident and determining that it falls within the scope of the policy, the insurer
will either retain counsel to fght the claim or, far more likely,
attempt to settle it.
It’s often difcult to determine which claims will turn into
large ones, Betterley says. And trying to make a small claim
disappear by settling it quietly and failing to report it promptly
or at all will likely exclude it from coverage.
EPLI generally covers even the behavior of an employee
whose actions were willful and not just negligent, such as
quid pro quo harassment of a worker by a manager. But will
it protect against the damage done by really bad actors like
serial harassers? Likely not for long. “The price of this in-
Organization’s Revenue Median EPLI Limit Purchased Median Premium Price Median Retention
Less than $25M $1M $4,900 $10K
$25M to <$100M $2M $12,000 $25K
$100M to <$250M $3M $25,000 $50K
$250M to <$500M $5M $45,000 $100K
$500M to <$1B $5M $65,000 $250K
$1B to <$5B $10M $105,000 $250K
$5B or more $30M $255,000 $1M
EPLI COVERAGE GROWS
WITH COMPANY SIZE