EPL insurance coverage has changed greatly in the last four years. At the beginning, coverage was severely limited by retroactive dates and the lack of coverage for prior acts. Additionally, coverage was not available for most of the common law tort claims that are traditionally associated with EPL claims. However, all of that has now changed. Almost every major EPL carrier has done away with retroactive dates and offers coverage for prior acts. Moreover, most major EPL carriers have expanded their coverage to include all of the common law tort claims.

The EPL insurance market is a dynamic market with most insurance companies improving their forms on an annual basis. The end result is good news for the policyholder, as each year the coverage becomes more expansive.

This is particularly important for employment practices claims because many employment claims allege a pattern of wrongdoing spanning many years. It is not uncommon for sexual harassment suits and race and gender discrimination suits to allege wrongful conduct spanning ten or twenty years. This is true of both class action claims and individual claims. If EPL coverage is written on a claims made basis, now that prior acts coverage is universally available, the policyholder captures the benefits of all of the policy enhancements from the time the first wrongful act is alleged until the claim is made.

If coverage is written on an occurrence basis, either the coverage will not be enhanced from year to year, or alternatively, if coverage is enhanced the enhancement will only be available for wrongful acts occurring during the enhanced year. This could make for a very complex coverage situation as the acts giving rise to some EPL claims could be covered under one year and not covered in an earlier year, resulting in a gap in coverage. Accordingly, from an insurance coverage standpoint, the nature of EPL claims makes them more conducive to a claims made form rather than an occurrence form.

With an occurrence policy, all coverage is frozen in time for all employment acts during the policy period. Coverage can only be enhanced going back into time by buying a claims made policy with full prior acts. This wipes the slate of poor coverage and trades in the Model-T for a Cadillac.

An even more important advantage of claims made EPL forms over general liability occurrence forms is the scope of coverage. Most employment claims allege intentional wrongdoing. Many claims made EPL forms cover intentional conduct while occurrence forms almost uniformly exclude from coverage intentional acts, willful failure to comply with the law, malicious acts and other wrongful acts that were in fact actual instances of breaking the law. It is very disturbing for an insured to get a reservation of rights letter of 15 pages or more beginning with a reservation for actual instances of breaking the law. The fact is, employment practices liability insurance often covers and pays for acts that breach employment law.

For example, a reservations of rights letter from a carrier with an occurrence form attached to a GL policy quoted an exclusion "any act committed by or at the direction of INSURED with intent to cause harm". They also point out that "in addition to this exclusion, there is a well established public policy in (the state) against indemnifying policyholders for intentionally-caused injuries. Accordingly, (the carrier) must reserve its rights to decline coverage for injuries falling within exclusion (letter) or on any ground inconsistent with public policy. In that vein we note that (the plaintiff) has sued (the Insured) for terminating her in violation of public policy: we believe it would be contrary to public policy to indemnify someone for conduct which itself violated a public policy."

This is the position that this carrier has taken and it is not inconsistent with other EPLI occurrence policies attached to GL policies. On the other hand, a claims made carrier affirmatively includes in coverage in addition to discrimination and sexual or non-sexual harassment:

1. termination, actual or constructive, of an employment relationship in any manner which is against the law and wrongful;

2. allegations of wrongful demotion, retaliation, misrepresentation, promissory estoppel and, intentional interference with contract; which arise from an employment decision to employ, terminate, evaluate, discipline, promote or demote;

3. defamation, infliction of emotional distress or mental anguish, humiliation, false imprisonment, invasion of privacy and other personal injury allegations which arise from an employment decision to employ, terminate, evaluate, discipline, promote or demote;

4. allegations of breach of an implied employment contract, breach of the covenant of good faith and fair dealing in the employment contract;

5. Employment terminations, disciplinary actions, demotions or other employment decisions which violate public policy or the Family Medical Leave Act or similar state law;

6. Violations of the Uniformed Services Employment and Reemployment Rights Act;

7. Allegations of breach of an employee's federal, state or local rights including but not limited to any violation of the Civil Rights Act of 1886 or 42 U.S.C. section 1983;

8. allegations of retaliation against any insured including but not limited to retaliation for filing under the Federal False Claims Act, retaliation in connection with whistle blowing, retaliation for union activities or in connection with strikes and lockouts;

9. allegations of wrongful deprivation of career opportunity or failure to grant tenure.

Many claims made EPL policies cover all of the above and they also cover economic damages such as front and back pay and insurance benefits that are a part of damages. Traditional GL occurrence forms only cover bodily or emotional injury, which is only a small component of EPL claims.

The bottom line is that EPLI attached to general liability occurrence forms are not primarily meant to cover EPL risks and only offer severely limited coverage for EPL claims. Usually what they cover is defense and then settlement when they become afraid to continue defending. Following trial most of the judgement would be excluded from coverage. On the other hand, claims made stand alone EPL forms have evolved over the last four years to broadly cover the EPL risk and only the EPL risk.