The past few years have been filled with newer exposures when it comes to employment practices liability insurance (EPLI). Along with significant disruptions in workplaces due to COVID-19, employers have been attempting to manage discrimination concerns around race, pay equity, gender identity, social media use, biometrics and more.
The biggest cost drivers for EPLI have been increased frequency and severity of lawsuits related to social movements and social inflation, according to Emily Loupee, area senior vice president, Gallagher, in a January report titled “Employment Practices Liability Market Condition.”
Also, COVID-19 introduced a new category of EPL claims. According to the law firm Jackson Lewis, which specializes in employment law, there are 332 total employer vaccine mandate suits nationwide. In these suits, employees are challenging employers’ vaccination mandates both on their face—contending the policy itself is unlawful—and as applied, particularly with respect to employers’ failure to grant accommodations or exemptions to the vaccination requirement. The law firm states that complaints typically allege multiple legal claims, including constitutional claims against public and private employers, accommodation/discrimination for both religion and disability, wrongful discharge/retaliation, privacy violations, and labor disputes.
EPL underwriters have to worry about COVID vaccine mandates, as well.
“In the face of resistance to vaccine mandates in the U.S., there may be an increase in retaliation and discrimination claims under the Americans with Disabilities Act and Civil Rights Act of 1964 (specifically, for religious discrimination),” according to USI’s 2022 Commercial Property & Casualty Market Outlook.
Insurers are willing to compete on EPL renewals if the employer’s business conditions are improving, brokers specializing in EPL coverage say. That means a business should be addressing the current issues affecting today’s workplace.
“I think right now there’s plenty of capacity,” Joni Mason, senior vice president, national executive & Professional Risk Solutions claims practice leader at USI Insurance Services based in New York, N.Y.
Manny Cho, executive vice president of RPS Executive Lines, agrees there are more carriers in the market right now, especially over the past 12-18 months. “There’s quite a few new carriers out there that are really trying to take advantage of a really good rate environment in the D&O/EPLI space.” That’s a good thing, he said. “Insurance can definitely benefit from more competition in this area.”
While there are more insurers now, Cho said by and large, most of them have fixed their books and business in terms of the types of classes they feel comfortable writing.
USI’s Mason finds that carriers are seeking additional insight when underwriting, and that includes information about return-to-work transition plans and employment policies representing newer areas of exposure such as gender identity discrimination and even social media use.
“In the last year or two, we’ve seen new claims, but what we are seeing from carriers is more granular scrutiny during the underwriting process,” she said. That means supplemental questionnaires around newer workplace issues, such as vaccine mandates, return-to-work policies and protocols, and diversity, equity and inclusion culture.
Employment claims are still the “workplace torch,” she added. While the number of claims in the EPL line has remained steady, the circumstances that lead to claims have changed dramatically, even while the EPLI coverage itself has remained relatively stable, she said.
However, Mason added, she has seen exclusions surrounding use of biometrics in the workplace as more employers seek coverage under their EPL policies for violations of the Biometric Information Privacy Act (BIPA).
BIPA is an Illinois law that regulates the retention, collection, disclosure and destruction of “biometric identifiers,” such as fingerprints, iris scans, facial scans and voice prints, and creates a private right of action for violations. In October 2021, a federal district court in Illinois held that an EPL policy can provide coverage to an employer when defending allegations in violation of BIPA. As a result, Mason said insurers are trying to push BIPA exposures to the cyber policy by adding exclusions.
EPL insurers are also seeking higher retentions, but that is also happening in most other areas of commercial insurance. “That’s driven by the increase in defense costs, but we’re also seeing some separate retentions for loss drivers like class actions, high wage earners and higher-exposure jurisdictions like California,” Mason said.
Carriers are closely scrutinizing COVID vaccine mandate policies. “We’ve seen a number of supplemental questionnaires surrounding the vaccine,” she said. “Do you have a vaccine mandate? Do you have a policy? What is your protocol in implementing the policy? Have you consulted with outside council regarding your policy?” Those are the questions being asked today, she added.
While COVID hasn’t yet generated the claims that were originally expected in EPL, it’s not over, Mason added. “I do think we’re going to see continued activity related to the COVID-19 mandates,” she said.
Mason anticipates future accommodation claims related to the Americans with Disability Act (ADA), as well as religious accommodation claims. But this isn’t anything new, she said. The sector has always had claims around ADA and religious accommodations, only now the circumstances leading to these claims are different.
The USI executive noted that in these cases, an employer’s best defense is in how they respond to their employees seeking accommodations, she said. For example, the employer under the ADA is required to “engage in the interactive process.” That means having a conversation with the employee and discussing why they believe they should have an accommodation. That allows the employer to suggest what might be appropriate as an accommodation.
“The act of failing to have that conversation actually can get you in trouble with a violation under the ADA,” she explained.
Employers are also being asked about how social media use intersects with the workplace. While not a new issue, employee misuse of social media is an area that has led to EPL claims in the past.
“They can engage in discrimination, harassment, talking about their employer, disclosing proprietary information, security breaches, union organizing,” Jennifer Reno, risk manager at the shopping network QVC, said at the 2021 annual RIMS Conference.
Privacy rights violations are among the most common risks.
Remote working during the pandemic has heightened concerns over employees’ use of social media, Jason Binette, AmTrust EPL product manager, told Insurance Journal.
“When an employee is at home and they’re posting things on social media that may not be acceptable in the workplace, and that somehow gets back around [to the employer],” then the employee gets terminated, he said.
“We’re seeing that type of unique exposure where someone might make a political post, or say you saw the employee at the January 6th Capitol riot on social media,” he said. If their employer terminates them, that could be a possible retaliation claim, according to Binette.
Employment retaliation continues to be a source of claims. The percentage of charges filed with the Equal Employment Opportunity Commission alleging retaliation has increased every year since 2002—rising from 27 percent of EEOC charges in 2002 to 56 percent of annual EEOC charges in 2021.
This trend has been partly driven by the 2006 U.S. Supreme Court case Burlington Northern & Santa Fe Railway v. White, which made retaliation lawsuits easier to bring against employers, Chris Williams, employment practices liability product manager for Travelers, told Insurance Journal.
“The Supreme Court held that an employee does not necessarily have to be demoted or have their pay reduced but that more nuanced forms of punishment, such as less favorable assignments, can also be considered retaliation under the law,” Williams said. “The U.S. Supreme Court decision has made it easier for a plaintiff to prevail on a retaliation claim because they do not have to allege that they were demoted, denied a promotion or denied wages.” Plaintiffs only need to show that they have suffered an adverse employment action to prevail.
Nearly anyone can bring a retaliation claim against an employer. “Unlike a discrimination claim, one does not necessarily need to be a member of a protected class (such as over the age of 40 or being disabled) in order to bring a retaliation claim,” he said. For example, employees who file workers compensation charges, or discover financial irregularities and report those, can bring retaliation claims if their employer takes an adverse action against them.
Retaliation claims are on the rise in part because employees are more aware of their rights in the workplace, according to Williams. But employers can take steps to mitigate their exposure to retaliation claims.
“It’s important for the employer to consult with outside counsel to go over the possibility of receiving a retaliation lawsuit, and what steps they can take to prevent a retaliation claim,” he said. “In particular, it is prudent to consult with an attorney before terminating or taking any adverse action against an employee.”
Williams suggests that employers thoroughly review the situation before taking action. “What does the personnel file say? Do prior reviews and salary and bonus history suggest the employee was performing below the required standard, or is the opposite the case? If the employee has complained of impropriety, what is the timing between the underlying complaint and any corresponding action taken?” he asked.
Williams also suggests that employers develop and review anti-retaliation policies. “Encourage employees to report unsafe practices that help create a culture that values safe and ethical behavior,” he said. “Provide more than one channel for employees to complain. Train supervisors to encourage an anti-retaliation policy and culture. Ensure that employees who complain are protected against retaliation.”
Plus, make sure insureds have the right insurance to help protect them from this risk, he added.
‘Concerted Protected Activities’
USI’s Mason said employers should use caution when addressing what an employee posts on social media. If the social media post is disparaging to the employer, employers need to be careful in the context of their response, she said.
Federal law protects an employee’s right to engage in not only union activity but also “protected concerted” activity. That means employees have the right to address work-related issues and share information about pay, benefits and working conditions with other co-workers, and with a union. Using social media can be a form of protected concerted activity.
“The NLRB (National Labor Relations Board) says that employees are allowed to engage in concerted protected activities, so if an employee posts something on social media regarding the conditions of their employment, then they should not be retaliated against,” she said.
And with the blurring of the lines between employees and other coworkers, it’s likely that other employees will be a part of each other’s social media networks. “So, it can be considered as a concerted protected activity,” Mason said.
Five or six years ago, Mason saw an uptick in claims related to concerted protected activities. “While I haven’t seen a lot of them currently, I do think that it’s something that we’re going to continue to talk about later with regard to pay disparity,” she said.
The gender-based pay gap in the United States has narrowed in recent years, but disparities remain, according to the U.S. Census Bureau’s 2019 American Community Survey (ACS), which reveals national median earnings for civilians who worked full-time, year-round in the past 12 months was $53,544 for men compared to $43,394 for women.
Many factors may contribute to earnings differences between women and men, including age, number of hours worked, presence of children and education. But as pay becomes more transparent, so will the awareness of disparity, Mason believes.
There are now eight jurisdictions—California, Colorado, Connecticut, Maryland, New York City, Toledo, Cincinnati and Rhode Island—with requirements over transparency in regard to salary range.
That transparency could spark future EPLI claims, she added.
As of May 15, New York City will require employers with more than four employees to disclose salary ranges related to advertising positions in an effort to close the gender pay gap. “I’ll be very curious to see if some of the discussion around pay disparity and pay transparency plays into employees’ use of social media,” Mason said. “I think that with that transparency will likely come more claims, unless employers start taking a hard look at gender pay disparity and get ahead of it.”
Longtail COVID Issues
While much of America is returning to the workplace and relaxing protocols around COVID safety measures, concerns remain about future EPL claims related to vaccine mandates.
“So far, there haven’t been very many claims, but the claims that [have] come in were all upheld by the courts. So, the courts were siding with the employers,” noted AmTrust’s Binette. “Now, the concern is, will the courts continue to support businesses that are requiring vaccines now that the federal government isn’t? That hasn’t been challenged yet, but I would imagine it’s only a matter of time before it is.”
Binette advises businesses, especially those in industries such as healthcare or education where vaccines are mandated, to secure EPLI coverage if they do not already have it.
Mason pointed out that possible claims related to COVID vaccine mandates have a long tail. “So, we may not even see the claims related to vaccine mandate and return-to-work protocols,” she said.
However, lawsuits related to an employers’ enforcement of vaccination policies, including alleged failure to accommodate a religious belief or medical condition, are expected to increase.
Communicate, and communicate clearly, advised Casey Roberts in a recent Academy of Insurance webinar titled “COVID and EPLI Challenges and Concerns.” Roberts, the founder of Laurus Insurance Consulting in Lincoln, Calif., says employers must “treat all employees fairly, and equally.”
That means properly training managers regarding the company’s COVID-19 policy for reasonable accommodations, Roberts said.
“Reasonable accommodation is the phrase you are always going to hear when it comes to EPLI. Could the employer have reasonably accommodated that employee? That’s the question. That is always a very significant question,” Roberts added. That will be important as this issue moves forward, he said.
“And make sure to purchase a well-designed EPL policy,” he said. “That’s up to the agents and brokers in the world to make certain that they’ve done their job properly.”
*This article was originally published in Insurance Journal magazine