A hardened employment practices liability (EPL) insurance market is never positive news. In fact, price variances continue to depend on the policyholder’s sector, location, potential exposures and loss history. Insureds have discovered capacity challenges from a competition shortage among primary and lower-excess layers. This is particularly prevalent for riskier industries (e.g., health care, retail, hospitality, leisure) and certain states (e.g., California, Illinois, Florida, New York, Texas).
First-time EPL insurance buyers should anticipate capacity challenges as carriers concentrate on profitability through existing customers. Overall, high-risk policyholders should brace for continued rate increases and coverage limitations.
Developments & Trends to Watch
COVID-19 workplace adjustments have prompted EPL claims and legal action against employers. The law firm Littler Mendelson’s research found that over 5,400 pandemic-related employment lawsuits were filed between March 2020 and March 2022. Allegations include:
- Employer failure to establish reasonable return-to-work employee accommodations
- Pandemic-related claims of discrimination
- Adverse employment outcomes based on employee COVID-19 vaccination decisions
Companies should expect these concerns to remain a prominent risk for employers and underwriters as implications from the pandemic continues.
The Equal Employment Opportunity Commission (EEOC) attributes the #MeToo movement for a substantial rise in sexual assault and sexual harassment litigation against employers. In response, the Biden administration signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act into law on March 3, 2022. The legislation enables legal opportunities for employees who alleged sexual assault or sexual harassment regardless of any previous arbitration. Experts warn the legislation could prompt additional employment litigation and related EPL claims.
Employment retaliation occurs when the employer forces inappropriate actions against an employee who exercises their workplace rights. The EEOC warns that employee retribution is the primary factor for employment litigation and associated EPL claims. In fact, over half of all EEOC charges involve retaliation.
Additionally, Advisen’s loss database reports that racial discrimination and harassment retaliation allegations experience the largest employer median severity ($185,000). While all industries risk retaliation losses, the public administration sector accounts for more than one-third (37%) of such exposures.
Biometric Privacy Exclusions
Employee biometric identifiers (e.g., fingerprints, facial geometry) are popular HR forms of identification and access control. Unfortunately, businesses that neglect to implement proper collection precautions are liable for employee privacy litigation and associated EPL claims. Compounding concerns, EPL insurers continue to exclude or cap their exposure to claims that involve biometric privacy.
Insurance Buyer Tips
While many outside influences have impacted the EPL market, your business has several options that can help to lower your risk including:
- Ensure your employee handbook and workplace policies include language on discrimination, harassment and retaliation.
- Document all situations that result in employee termination.
- Implement effective sexual harassment prevention, reporting and response measures.
- Establish proper workplace protocols about the protection of employee biometric identifiers.
We’re Here to Help
Experts continue to predict a 10 to 25% increase in EPL insurance premiums. Don’t worry; you’re not in this alone. We’re here to help you understand the current EPL market and strategize with risk management opportunities to protect your organization from these exposures. If you have more questions about your EPL coverage or the status of the market, connect with a member of our team.