EPLI market

EPLI Market in 2021 Shows Increased Risks

It has been nearly a year since the first recorded COVID-19 case in the U.S. was announced, and the virus continues to take a devastating toll on the country. In addition to the obvious health impacts, the pandemic has had a tremendous effect on the economy, infiltrating nearly every sector. The insurance market is one arena that is beginning to experience the ripples of instability, uncertainty, and increased risks that fluctuating guidelines and rising infection and death rates have wrought.

While industries that were able to move their employees to remote work did so at the beginning of the pandemic, numerous employers were unable to do so due to the nature of the work. In addition, as restrictions lifted, some remote workers were sent back to the workplace. As a result, employers could see a significant increase in claims related to COVID-19. As such, the outlook for the  employment practices liability insurance (EPLI) market shows an increase in risks for 2021.

What Is EPLI?

One question that frequently gets asked is, “Is employment practices liability insurance the same as workers’ compensation?” It is not. EPLI coverage provides employers protection against claims that are filed for wrongful employer practices or acts. There are four major claim categories EPLI policies usually cover, though some policies may cover others:

  • Privacy rights
  • Negligence
  • Discrimination
  • Employment status

What Does COVID Have To Do With EPLI?

At first glance, it may not seem like any of these types of claims would have any relevance to the pandemic. However, there are several coronavirus-related claims that do have the potential to fall within the employment practices liability insurance coverage. One type of case, in particular, could fall within EPLI policy provisions.

While these policies typically don’t cover claims related to injuries or illnesses, they generally cover policy rights infringement cases. This is relevant because when someone in the workplace contracts COVID-19, contact tracing is conducted. During this process, other employees inevitably discover that a coworker has the virus. Thus, claims alleging unlawful disclosure of health information could result.

What Are the Risks for 2021?

EPLI insurance carriers may see a rise in the number of cases filed. In addition to potential increases in privacy rights claims, one other category of professional liability coverage likely to see increased risks for claims is director’s and officer’s liability insurance. The economic downfall from the pandemic is primed to continue and deepen in the new year. Small businesses in particular will face significant financial hardships, as they have so far.

Larger corporations often have surplus capital to withstand business interruptions while supporting employees, at least to some extent. The same is not true for small businesses. As such, it is quite likely that more D&O claims will be filed in 2021 due to increased litigation. Furthermore, it is entirely possible that courts will order higher payouts because of a widespread perception that companies should have been better prepared for the scenario the country is currently facing.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

EPLI lawsuits

EPLI Lawsuits on the Rise Due to COVID-19

The coronavirus pandemic of 2020 had both immediate and far-ranging effects on business management. Employers struggled to keep afloat while making critical changes in the way business operations were conducted. Some of these changes revolved around procedures and policies governing remote work options for employees. Others included the implementation of safety procedures, reduced hours, and cuts in payroll. Unfortunately, rapid evolution of the pandemic workplace has resulted in a sharp increase in employment practices liability insurance (EPLI) lawsuits. Employers need to gain an understanding of the factors behind these legal challenges, helping them to manage the risks that employment practices liability insurance is designed to cover.

A Spate of Employee Lawsuits in the Wake of the Pandemic

As the pandemic spread across the United States, state lockdown orders and social distancing recommendations meant that employers had to make exceedingly difficult decisions. Many businesses were forced to curtail operations altogether, while others were able to reduce hours and workforces to make ends meet. So-called “essential” businesses such as gas stations, grocery stores, and pharmacies could remain in operation, but the spread of the coronavirus in cities across the country put employees at risk.

COVID-19 took its toll on essential workers, with thousands reporting illness and still others dying from complications of the infection. The first EPLI lawsuit filed in the U.S. occurred on March 25, 2020. The estate of a deceased Walmart employee sued the retailer, alleging managers knew that several of their employees and customers were infected with COVID-19. Negligence on the part of the store and its managers were alleged to include:

  • Failure to adopt and promote social distancing/quarantine guidelines mandated by state and federal authorities.
  • Failure to adequately clean and sterilize store areas to prevent the spread of infection.
  • Failure to provide personal protective equipment (PPE) to the deceased employee and others in the store.
  • Failure to develop a response plan for infections.
  • Failure to provide warnings to employees who may have been exposed to COVID-infected individuals.

A Looming EPLI Crisis?

After the Walmart negligence lawsuit was submitted to courts, other employee lawsuits followed. In Texas, the family of a deceased meatpacking employee sued the company for negligence, alleging that the employee had been told to report to work despite exhibiting symptoms of COVID-19 under threat of dismissal. In that lawsuit, filed in April 2020, other employees claimed that the meatpacking company took no precautions against the spread of infection, potentially putting plant workers at risk of illness or death.

Since then, dozens of similar lawsuits were filed, putting strains on even the most comprehensive employment practices liability insurance. As the pandemic continues, business analysts expect hundreds, if not thousands, of legal claims against employers for failing to take precautions against the spread of COVID-19. The defense costs of lawsuits alone can negatively harm business assets; paying claims or settlements for failing to protect employees may bankrupt employers who have struggled throughout the pandemic. EPLI coverage may protect many employers, but even this insurance protection may not be enough to withstand repeated legal claims.

Managing COVID Risks in the Workplace

Employment practices liability insurance (EPLI) is one of the cornerstones of a robust risk management program for employers. Protecting the business and its employees supplements the coverage afforded by this valuable insurance. Employers facing legal claims against their employment practices must do more to prevent the spread of COVID-19 in the workplace. Business owners must also evaluate their existing insurance coverages, pinpointing exclusions and coverage gaps that may come back to haunt them if employees were to become infected.

The pandemic has created significant challenges; smart business owners took the steps needed to prevent infections from harming business operations, while others may have unnecessarily put their workers at risk of illness or death. By adopting stringent risk management practices, including following the guidelines of infectious disease agencies and state/federal officials, employers may weather the challenges imposed by COVID019 while helping to keep their workers safe.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.