Insurance agencies are not unlike other small businesses—they are all cost-conscious when it comes to insurance needs. Unlike errors & omissions coverage, employment practices liability insurance is not required for agencies. So, the question becomes: Does my agency really need it?

If you have employees, the answer is “yes." While agencies strive to follow employment and discrimination laws, that alone will not prevent an allegation that the agency violated one of those laws.

Defending an EPLI claim is expensive and exceeds the cost of the premium for this coverage. Here are two claim scenarios where, due to the good foresight of the agency owners, there was an EPLI policy in force to defend the claims:

1) All in the family. A small agency had a handful of employees, one of which was the son of the prior owner. The prior owner had sold the last of the agency's shares to a long-time employee but continued to work as an employee at the agency.

The son had worked for the agency before the sale, but his employment ended in termination by the prior owner due to disputes between them. Several years later, after the new owner took over the agency, the son returned to the agency. But soon after, he became involved in disputes with other employees, the prior owner and the new owner. This environment affected employee morale and was a cause of daily stress for everyone at the agency.

The situation came to a head and the new agency owner decided to terminate the son's employment after a very lengthy argument broke out in the agency, which resulted in the son calling the police. The next morning, the new owner terminated the son but was unaware that the son had filed a complaint with the Occupational Safety and Health Administration (OSHA) for workplace violence the previous day.

The son then filed a complaint with the U.S. Department of Labor after the termination for workplace retaliation for filing the OSHA complaint. The matter ended up in the filing of a lawsuit.

2) Best laid plans. An agency hired an employee—let's call them “E"—to perform duties that required in-office attendance. The agency attempted to assign computer tasks to E. However, these tasks had to be redone by other employees due to the poor quality. Also, throughout E's employment, there were several recorded instances of misconduct.

In early 2020, E claimed health risks due to the pandemic and did not come into the office. After several weeks, E discussed a voluntary layoff. The agency owner agreed to do so, and the agency memorialized it in writing.

After several months, the agency advised E of a permanent layoff due to the financial situation of the agency. The agency owner restructured and streamlined its business model in 2020 in an effort to reduce duplicative and unnecessary expenses. E's duties were assumed by the owner and other employees. No replacement was hired for E.

However, E then filed a discrimination complaint for failure to offer reasonable accommodations and unlawful retaliation for taking a medical leave of absence.

Neither of these agencies ever expected to utilize the EPLI coverage that it procured. However, unexpected situations arise that can create financial hardship for a business if EPLI coverage is not purchased. Fortunately, both agencies had purchased an EPLI endorsement as an additional coverage through their E&O policy. The agencies reported these claims to the E&O carrier and a full defense was provided with a nominal cost to both agencies.

Janice Blanton is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and a teleworker out of the office in Kansas City, Missouri. Insurance products underwritten by Swiss Re Corporate Solutions America Insurance Corporation, Kansas City, Missouri, a member of Swiss Re Corporate Solutions.  

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re") and/or its subsidiaries and/or management and/or shareholders.