That's why EPLI is now a routine coverage recommendation at Harmon Dennis Bradshaw. By methodically discussing employment practices liability with our clients and prospects, and including a quote for EPLI in every commercial-lines proposal, we've added the coverage to the majority of our clients' accounts. In addition, we've significantly lowered our E&O exposure.
Ninety-five percent of our business is derived from commercial lines, making it all the more important for us to think of EPLI as a fundamental coverage for clients and prospects. Even before we talk to them about the product, we find that most clients in our area are well aware of their employment-practices exposures. Birmingham has one of the most active U.S. Equal Employment Opportunity Commission offices in the country, and many businesses throughout the state know of EEOC complaints filed against friends, competitors or other businesses. Clients, however, are not always aware that discrimination, sexual harassment or other employment-practices claims are excluded under their general liability policies. Once they understand that there's a significant coverage gap, they nearly always add EPLI to their programs; it's just a matter of discussing the options and exposures.
Third-party coverage is one of the more important options we review. It responds to such allegations as an insured's employees harassing or unlawfully discriminating against a customer or other third party. Certain businesses have an above-average risk of third-party claims. They include law firms, doctors and other medical-service providers, automobile dealerships, retailers and other businesses and professionals who have a high level of customer contact. The product also responds to claims of employees who allege that their employers did not protect them from the harassment of vendors, customers or other third parties. Now, in the soft market, is a good time for companies to add the coverage. Five years ago, it was difficult to obtain third-party EPLI coverage. Today, just about all markets offer it as an option.
Another option we discuss with clients is whether to provide EPLI on a stand-alone basis or packaged with other coverages. Often, coverage takes the form of a management liability product that also includes D&O, fiduciary liability or other lines of insurance. On the other hand, stand-alone EPLI policies typically are preferred by clients who forgo these options; e.g., a contractor who may not have a board of directors but does have a diverse work force.
We also discuss defense provisions. Often defense costs are a major part of a claim, so we generally advocate policies that pay defense costs in addition to the policy limits. We also favor policies that provide full prior-acts coverage and coverage for punitive damages, which are insurable in Alabama.
Usually, EPLI premiums are not a major impediment to a sale. Many of our commercial clients pay $50,000 to $700,000 or more for their insurance programs. Since EPLI premiums for these clients range from $7,000 to $15,000, many are willing to consider adding the coverage. Generally, we arrange $1 million limits. Deductibles typically range from $5,000 to $25,000, depending upon the number of employees and potential exposure.
The product can be a tough sell to small businesses. In organizations with fewer than 30 employees, the owners typically are on the premises nearly everyday and feel they have the work environment under control. Consequently, they may conclude that it is not worthwhile to spend $7,000 on an EPLI policy that also has a $5,000 deductible. Rather, they decide that if a problem comes up, they'll just spend that $12,000 on an attorney and hope for the best. However, clients accept our recommendations to add EPLI to their insurance program most of the time.
Among the better prospects for EPLI are manufacturers and similar businesses that have many people working closely together in a controlled employment environment. The larger the work force, the more likely a prospect will be interested in the coverage.
Since we sell EPLI almost entirely to current clients, we do little marketing or advertising geared specifically to the product. Occasionally we send clients and prospects information that Chubb, one of our insurers, posts on www.ChubbWorks.com, a site devoted to employment practices issues. Articles available on the site provide information on loss control, trends in wage-and-hour litigation, racial discrimination claims, etc.
Submissions
In addition to an application, the most critical thing to give EPLI underwriters is a copy of a prospect's employee handbook. Ten years ago, relatively few prospects had one. Most handbooks that did exist did not address discrimination issues, grievance procedures, right-to-work issues, etc. Now, most prospects have comprehensive employee manuals, often prepared with the help of legal counsel. Underwriters also expect to see a copy of a prospect's employment application. EPLI insurers want insureds to do more to prevent losses than have employee handbooks. They also generally require employers to have their supervisors and HR managers undergo a certain amount of employment-practices training annually. Often, the training can be taken online.
Among the data that EPLI underwriters check closely are a prospect's claims history, whether it anticipates any downsizing or layoffs, management training, the size and composition of its work force and whether it is unionized. They also evaluate employee handbooks for completeness and determine whether employees are required to provide written confirmation that they have received the handbook, read it and agree to be bound by it.
Among the admitted insurers with which we place EPLI are Chubb, Hartford, Fireman's Fund, Philadelphia, Travelers and AIG. We also work with wholesalers like Professional Liability Insurance Services and Wood Special Risk Brokers to access such surplus-lines markets as Lloyd's, ACE and CNA E&S. We don't use these markets just for clients who have adverse claims histories or other blemishes. At times, we also can get a better-designed product from an E&S carrier than we could from the admitted markets, or a client might insist on a coverage feature that is available only from a nonadmitted carrier.
Almost every company with which we do business has a toll-free "hotline." Clients can use one to obtain advice about such matters as changes to employee handbooks, anticipated terminations, potential claims, etc. These hotlines are important services, and our clients use them often.
The legal climate has changed from the days when most businesses never thought they'd be sued by their own employees. Today, all but the smallest employers probably expect their agents to discuss EPLI with them. Those agents who have not already done so should make it their practice to discuss employment practices with every one of their commercial-lines insureds, just as we have at Harmon Dennis Bradshaw.

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EPL insurance is a key part of our agency's game plan

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