No conversation about the Employment Practices LiabilityInsurance (EPLI) market is complete without the mention ofwage-and-hour claims, notes David Derigiotis, director ofprofessional lines for the specialty-risk division at Burns &Wilcox.

Independent hotels, restaurants and auto dealers areparticularly susceptible to such claims due to high turnover andthe typical lack of a structured human-resources department atthese operations, Derigiotis adds.

But while the need for such coverage is enormous, the challengefor buyers and the brokers and agents who represent them is that itis very hard to come by: Most carriers simply won't offer a policythat covers these types of claims.

According to Richard Betterley, president of Betterley RiskConsultants, insureds regularly request wage-and-hour coverage, butinsurers are unwilling to underwrite a risk that many see as abusiness-practices issue entirely under the control of theemployee.

Phil Norton, head of the Professional Liability practice atbroker Arthur J. Gallagher, adds that if an insured does manage tosecure a wage-and-hour endorsement, it could cost more than anentire typical EPLI premium.

For large, publicly traded companies where the exposure ispotentially great, wage-and-hour coverage is almost universallyexcluded, says Ann Longmore, product leader for EPLI, fiduciary andD&O at Willis.

But for smaller, private companies, it is possible to obtainabout $100,000 to $500,000 worth of coverage for defense costs—butgood luck getting that policy renewed if those funds have to bepaid out, she adds.

Of course, whenever there is a pressing demand for a product,developing a profitable way to address the need presents acompelling business opportunity.

And Derigiotis sees an untapped market—albeit a challenging onefor underwriters—geared toward some workable coverage for smalleremployers where the demand is great, but the risks are not soenormous.

“I think a [carrier] can figure it out—and the need isdefinitely out there,” he says. “Smaller companies are likely nottrying to violate the law. Their [wage-and-hour miscues] could beunintentional because they don't have an internal departmenttelling them what to do.”

Until the coverage becomes more available, Joni Mason, seniorvice president and Employment Practices Liability product managerat Chartis Insurance, urges employers to be proactive in avoidingthese claims through self-audit and ensuring they are in compliancewith regulations.