Insurance Coverage For Sexual Harassment In The Workplace

Most forms of insurance won’t cover sexual harassment claims. Employment Practices Liability Insurance (“EPLI”) will. To get the best protection, you need to know how these policies work.

• Most EPLI policies are written on a claimsmade and reported basis, not an occurrence basis. This means the employer has to make a claim quickly, usually as soon as an administrative claim (EEOC, state agency) is filed. It may be a mistake to wait until a lawsuit is filed.

• Some policies will provide endorsements to cover prior acts (acts which preceded the issuance of the policy), or for an extended reporting period.

• EPLI policies usually provide that defense costs are included in the coverage limits. they reduce the coverage by the cost of defense on a claim.

• Some EPLI policies don’t require the insurer to defend. They permit the insured to manage its own defense, which the insurer will pay for. This is an important option if you can get it since it allows you to use counsel of your choice and have a say in the defense..

• Most EPLI policies give the insurer the right to settle the case as it deems proper, but only with the insured’s consent, and contain a “hammer clause.” This clause typically says the insurer will not be liable for any amount in excess of what it would have settled the case for had the insured not withheld consent. Some policies have “soft hammer” clauses that require the insured and the insurer to share the amount exceeding what the insurer would have settled the case for.

• EPLI policies are intended to cover claims made by employees. Depending on the policy language, harassment claims made by third parties (vendors, customers, and so on) might not be covered. Similarly, the policies might not cover claims by independent contractors, leased workers, and even temporary employees. It is crucial to ask about these things.

• In jurisdictions where permitted, the EPLI policy may cover punitive damage awards.