Whistleblowers play a critical role in highlighting unethical or illegal activities within an organization. Their role is essential if organizations are to maintain their integrity, as well as the trust and confidence of the public. 

Today, the number of lawsuits filed by employees against their employers has been rising, according to the Insurance Information Institute (III). These claims include everything from discrimination and sexual misconduct to wrongful termination and biometric privacy law violations.

While most lawsuits are filed against large corporations, every company should be aware that they are not immune. Independent agents can ensure clients have the coverage they need by offering employment practices liability insurance (EPLI) coverage that can protect a business against claims by workers that their legal rights as employees of the company have been violated. 

“In recent years, the EPLI marketplace has been rapidly developing to continue championing fairness and equity in the workplace, and to better protect employees," says Mike Maletsky, vice president— technology errors & omissions, cyber, at Hiscox. “A natural byproduct of change in this market tends to be increased claims frequency and claims severity."

When it comes to whistleblowers, it is important to allow and encourage them to come forward for the good of the organization and also to afford them some protection. “Employees are closest to the inner workings of a company and deserve protection if they identify any malpractice," Maletsky says. “Most EPLI policies contain coverage for whistleblowers, and agents should proactively confirm this, particularly in regulated industries where whistleblowing is more likely." 

In certain instances, EPLI includes coverage for whistleblowers if they allege they are being retaliated against by an employer. “Retaliation occurs when an employer takes a materially adverse action because an applicant or employee asserts rights protected by the U.S Equal Employment Opportunity (EEO) laws," says Thomas Hams, managing director, national EPLI practice leader, Aon. “Asserting EEO rights is called 'protected activity.'"

And while it is important for employers to protect themselves against claims by employees of wrongdoing, businesses must also protect themselves if an allegation of retaliation is made against them. This is particularly important as “the EEOC recently released their 2023 statistics, which highlight that the monetary value of the retaliation specific claim has gone up dramatically," Hams says.

Employees who prove retaliation are entitled to relief in court. To alleviate possible claims, “clients should work with an employment attorney to put in place a formal whistleblower policy within the employment handbook," says Afsana Ali, product leader, EPLI, Beazley. “This will provide an avenue for the company to remedy the issues being raised and significantly reduce potential liability raised by the whistleblower."

As society continues to develop and grow, so too do the laws on the fairness and protection of employees. In a recent U.S. Supreme Court ruling the court clarified that employees alleging retaliation for protected whistleblower activity under the Sarbanes-Oxley Act of 2002 (SOX) do not need to prove “retaliatory intent" to prevail in their claims.

As a result, “retaliation claims continue to be by far the biggest frequency of claims because they're so easy to bring," Hams says. “You can get past summary judgment on a retaliation claim much easier than a race claim."

The ruling “makes it easier for employees to pursue whistleblower claims, by not requiring employees to demonstrate any motivating intent behind an employer's decision to terminate them or retaliate against them for any protected activity," Ali says. “In 2023, the U.S. Securities and Exchange Commission announced that it had awarded its largest ever amount—$279 million—to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions."

One impact of this ruling could be “the decision seemingly puts a SOX whistleblower claim on the same playing field as Title VII discrimination framework, which also does not require the showing of 'retaliatory intent,'" says Aileen Berry, executive vice president and West Palm Beach branch leader at Amwins Brokerage of Florida Inc. “Carriers may begin excluding SOX claims, sublimiting coverage or modifying deductibles. Companies may need to invest more in compliance programs and training to mitigate the risk of related claims."

Agents can provide their expertise to clients by keeping up to date with this evolving market, but can also benefit by working with “a carrier that has a robust risk management provider," says Dan DeAlmeida, EPLI underwriter, Beazley. “These additional services are usually included in the EPLI policy premium and provide HR support in areas such as an employee handbook and an employee complaint hotline, as well as unlimited HR advice."

Olivia Overman is IA content editor.