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What can get an EPLI policy claim denied?

The spotlight is on claims of sexual harassment in the workplace these days. Many point to the allegations by women against film producer Harvey Weinstein as the snowball that grew into the so-called #MeToo movement. A sidebar is that business owners in Pennsylvania and across the country are assessing if they're prepared to manage the risks of employment-related legal disputes.

As part of the process, company leaders might be reviewing their insurance portfolios to see if they have employment practices liability insurance (EPLI). If they don't, they may be thinking about getting a policy. In either case, employers need to understand conditions under which an insurer might deny a claim.

The Value of EPLI

The argument in favor of having EPLI coverage is straightforward. An active policy can minimize financial risk from claims that might arise under federal employee protection law and similar state laws. Typical coverage includes:

  • Legal costs
  • Payment of settlements or judgments

Potential Insurer Loopholes

The benefits under such policies can be jeapordized in a number of ways. Bad timing is one. EPLI policies are often structured on a "claims made and reported" basis. That requires that for a claim to be valid, it must be brought during the time when the policy is in force. It must also be reported to the insurer within the effective policy period. As an example of how this could become an issue, consider the following.

A complaint alleging harassment or discrimination is filed seeking a right to sue. As the employer, you might not see that as cause to file a claim, but your insurer might. In the time between the initial complaint and the suit, your policy period could expire, giving the insurer grounds to deny coverage.

Also, most if not all EPLI policies, stipulate that coverage doesn't begin without the insurer's written consent. What this means is that any costs, legal or otherwise, incurred by your company before a claim is reported won't be covered.

One last thing to note is that claims not filed exactly according to policy requirement can result in a denial.

With all the costs that can result from an employment-related dispute, proper risk management is obvious, and that is best done by enlisting the experience of the Kisner Law Firm to decide if an EPLI policy is right for your business. 

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