From the Front Lines: EPLI

How did you get started at your agency?

I actually managed claims offices for 15 years with an insurance company, and my company left America. They basically sold all their business. I had a good friend who used to work for me as a supervisor and he called me up and said, “Hey, why don’t you come over here?” So I did. That was 15 years ago.

Why employment practices liability insurance?

It’s a huge part of any business. They’ve got workers’ compensation, which is a big cost, and then they have employment, which usually results in large losses and lots of expenses. So it’s a focus simply because of the need of the client. Probably 15 years ago when EPLI coverage started to come out, nobody purchased it. Now, there are still people who still don’t buy it, but more than 65% of businesses buy EPLI. It’s something that we continually sell and push—not only the coverage itself but increased limits and better coverage.

Biggest EPLI changes over the years?

All the laws that have been coming into effect. The Americans with Disability Act is extremely broad and it’s just required employment practices to be covered because there are so many different ways that a protected class can file a claim against you, regardless of whether it’s true or not. In a lot of regards, it’s an expense coverage, because you’re actually being accused of doing something illegal. That coverage affords defense, and defense is what you need because even if you’re innocent you could spend $100,000.

Biggest EPLI challenges?

One is getting businesses to report to us as agents early—meaning, “We’ve got a problem, can you give us some guidance?” Most of these coverages have a 800 where insureds can call an attorney for free, but getting someone to report it early on so that they can get help is difficult, believe it or not, because nobody wants anybody to know there’s a problem. They think they can handle it and it’ll blow over. You’re constantly trying to get people to understand the benefit of involving people who actually have fiduciary duties to keep it confidential.

And then I think the second part is convincing people who haven’t had a loss yet that they need the coverage. They’ve taken care of a lot of stuff behind closed doors, they’ve made little-bitty settlements with people here and there, and they haven’t had the big one. But it’s just around the corner.

Future of EPLI?

A lot of people are using leased employees and temporary employees and independent contractors. They’re doing all these things to move workers comp off their balance sheet and income statements, and they’re also trying to transfer the risk. But what’s happening is these different types or classes of workers, they’re kind of getting merged altogether. So you may have a contract with an independent contractor, but if you have total control, that’s not an independent contractor. That’s an employee. So everything is going smoothly until a lawyer gets involved and says, “Wait a minute, you’re not an independent contractor—not based on all the things they’re having you do and the tools they’re providing.” Or a temporary service has the employee, but you’re so in control of the safety and what they’re doing that somehow you breach that issue, and now coverage might be there or it might not be there.

As the different types of classes get merged together, how is it going to interact with your policy? I think the insurance companies are reviewing all those things and there are endorsements that enhance the coverage, but you as a buyer might not know about it. So you have to be informing your agent what exactly you’re doing with your employees. an agent only does what a customer tells them to do. We can ask questions, but if you don’t open up to your agent the full disclosure on what your future plans are and how you’re looking to shift risk and contracts and different things like that, you could be getting yourself into a position where you don’t have enough coverage, or you have no coverage.

Advice for a fellow EPLI agent?

Know your policy forms. We consider it a professional liability, so you have to know what the policy covers and doesn’t cover. Secondly, you truly have to know your client’s business.

And make sure you’re out talking to the carriers and the underwriters to ensure you understand exactly what the intent of their policy is. You have to make sure your knowledge is in sync with the carrier. Some use ISO standard policies, some use manuscript and some use modified ISO, so not all policies are the same. Knowing who you’re dealing with, knowing what carrier you’re dealing with, and making sure you’re not talking from a knowledge base that doesn’t reflect the policy, because there are little nuances that can really put you in a bad situation.

Favorite EPLI success story?

Whenever a customer says, “Thank you so much for making me purchase this because I just got a suit and I need to send it over to you, and it’s a bad one.” We’re able to give them the 800 number, connect them with their attorneys to get things moving, and then they find out wow, this was really good. And the outcome is the case gets settled. Most employment cases get settled. Taking an employment case to trial is never a good deal.