It was never the intent of the general liability policy to cover employment practices claims. Most employment related claims are not within the scope of the general liability coverage and are excluded by the expected or intended injury exclusion, the employer’s liability exclusion, or because the damages sought are neither bodily injury or property damage.

As a consequence of the routine use of an exclusionary endorsement and in response to the growing liability presented by employment practices, a new insurance product has emerged which is specifically designed to response to these exposures. Employment Practices Liability (EPL) coverage has become one of the most visible new products to emerge in the insurance industry in many years. It covers claims due to employment practices. Employment practices means any of the following practices directed against any current for former employee, leased worker or temporary worker, or applicant for employment:

Employment Practices Liability

  • Wrongful refusal to employ a qualified applicant for employment;
  • Wrongful failure to promote a qualified "employee" or "leased worker";
  • Wrongful demotion, negligent evaluation, negligent reassignment, or wrongful discipline;
  • Wrongful termination of employment, including retaliatory or constructive discharge;
  • Harassment, coercion, discrimination, or humiliation, as a consequence of race, color, creed, national origin, marital status, medical condition, gender, age, physical or mental impairments, pregnancy, sexual orientation, or sexual preference; or
  • Oral or written publication of material that slanders, defames, or libels and "employee", "leased worker" or "temporary worker" or violates or invades and "employee’s", "leased worker’s" or "temporary worker’s" right to privacy.

Over the past four years, jury verdicts and legislative enactment’s regarding employment law have greatly altered the approach taken by corporate entities as it relates to the employer/employee relationship.

Employment law cases have fast become one of the largest components of the civil dockets of federal courts, rising 125% over the past 20 years. Current trends are showing the majority of employment practices cases are now going into state courts, and therefore, federal court cases are only the tip of the iceberg. In 1998, the average award for a sexual harassment suit was $300,000 and the defense costs on these cases are averaging $180,000-$250,000 each.

Additionally, employment discrimination complaints filed with the Equal Employment Opportunity Commission (EEOC) have grown 53% in a four year period, reaching 110,000 in 1998. It is estimated that the EEOC complaints represent only 60% of employment discrimination charges filed with all governmental agencies. In 1998, the EEOC obtained $10.5 million for victims of discrimination which is in addition to the hundreds of millions awarded to claimants by the courts.

Virtually every commercial entity has an EPL exposure making the breadth of the potential market enormous.