Health directives have been a thorny issue in the U.S. How will new mandates impact EPLI coverage and pricing now and in the future?
By Jonathan Selby
Despite this country’s long history of vaccine mandates dating back to George Washington, it’s often a thorny legal issue to navigate in the U.S. Unfortunately, when health requirements impact companies, head-to-head battles between employers and employees can quickly follow.
In these situations, employment practices liability insurance (EPLI) works to protect employers against employment-related lawsuits. With the Biden Administration’s recent vaccine mandate in mind, here are several EPLI considerations to mull over as they relate to companies nationwide.
Biden’s vaccine mandate
To begin, Biden hopes to create a patchwork of directives instead of an overarching mandate, with overlaps occurring at the federal, state and local levels.
Coming directly from the White House, here’s an overview of the Administration’s initiatives:
Require all employers with 100 or more employees to ensure their workers are vaccinated or tested weekly.
Require vaccinations for all federal workers and for millions of contractors that do business with the federal government.
Require COVID-19 vaccinations for over 17 million health care workers at Medicare and Medicaid participating hospitals and other health care settings.
Call on large entertainment venues to require proof of vaccination or testing for entry.
Require employers to provide paid time off to get vaccinated.
The backlash of 2020
Employers faced loads of push-pull at the state level in 2020 — but not because anyone purposefully choreographed it. The Centers for Disease Control and Prevention (CDC) and other agencies worked diligently to develop safety guidelines for employers and individuals alike. This process was bumpy, with procedures being clear as mud at times. Very few of us had ever experienced a global pandemic, after all.
Many employers sent workers home to do their jobs, only to call them back into the office months later. Sure, social distancing was in place, and many states followed stay-at-home orders. However, was the decision for remote work a mere convenience or accommodation for employers? The distinction is critical, mainly because of how quickly it can (and did) trigger EPLI claims.
Keep in mind that it’s a change in terms and conditions of employment for companies to send their teams home to work. Furthermore, employers must only attempt to accommodate their workforce. However, employers can consider terminating the employee if they can no longer perform essential job functions remotely but refuse to return to work. You can imagine that the dust hasn’t settled on many of these cases and how vaccine mandates might trigger similar issues.
Carriers’ EPLI market outlook
Few underwriters will peg this past year as anything less than a nightmare, with mass layoffs, furloughs and reductions. Jordan Kurkowski of Amwins Brokerage agreed with those sentiments, saying: “There is more of that happening during this time with massive unrest in our country, and we’ve seen political and religious beliefs trigger some of these claims, too.”
Additionally, other lines have been impacted in the wake of the Black Lives Matter and #MeToo movements. For example, directors and officers (D&O) insurance typically cover shareholders’ claims, and the rise in these suits and settlements being astronomical nowadays. However, claims with allegations such as discrimination or harassment usually fall under EPLI.
Although insurers haven’t noticed a sharp hike in loss payments yet, that might change soon. Regardless of COVID-19, we’ve seen EPLI premiums and retention steadily rise with general social inflation, particularly in litigious areas such as California and New York.
Chris Williams of Travelers said: “Employment practice liability insurers are seeing an uptick in vaccine mandate claims.” The law firm Fisher Phillips reports that roughly 2,950 COVID-19-related employment lawsuits have been filed in the U.S. since the pandemic began. These claims range from remote work disputes to workplace safety to discrimination, and underwriters can agree that this topic is a high exposure area.
How mandates could impact pricing
It’s safe to say that the concepts of vaccine mandates and other health regulations are here to stay — as is remote work. Although one idea is potentially more widely accepted than the other, the combination of complexities will likely trigger a rise in EPLI claims. And unfortunately, the reach of federal employment laws remains largely unsettled. Still, consider some of the most recent and widespread types of EPLI claims:
Wage and hour litigation
Gender pay gap allegations
Sexual harassment claims
So will EPLI premiums inch toward the path of the hardening D&O market? Can companies expect to pay more for a policy soon? On a similar note, how will settlements stack up?
For starters, my colleague at Founder Shield Kyle Jeziorski, executive vice president, offered insight: “I think insurers will try to add COVID-19 exclusions to EPLI policies and potentially offer the coverage for an additional premium.”
Flip the script, and another colleague, Jeff Hirsch, executive vice president at Scale Underwriting, unfolds the issue of convincing companies to purchase an EPLI policy. In a recent conversation, he said: “Leaders often assume it’s more effective hiring a human relationship staff person than buying EPL insurance — but the opposite is true. Even with the increase in claim severity and frequency, paying a claim-free premium is still less than paying a salary.”
A message to brokers & agents
Fewer than 2% of companies in the U.S. have 100 or more employees; however, Biden’s mandate could still impact over 80 million workers. Noncompliance could result in penalties of up to $14,000 per violation. Many company leaders will turn to their brokers and agents to help navigate these unparalleled times — so prepare now.
Jeziorski’s note continued: “Brokers and agents must clearly spell out to insureds what (if any) coverage for COVID-19-related incidents may be afforded to them in a policy.” That said, this evolving issue must stay on the radar, whether it’s monitoring claim activity or keeping a watchful eye on the EPLI market.
Also, Hirsch advises brokers and agents to add buy-on products (i.e., free handbooks, policy updates, etc.) to convince companies an EPLI policy purchase is the wisest choice. Companies can rely on many carriers to support the person responsible for employment practices, arranging them to facilitate claim prevention and repair. So, it’s a win-win.
Many insurance professionals have already been neck-deep in EPLI litigation before, putting us in an excellent position to advise insureds.
Lastly, hold tight to the words of EPIC Insurance Brokers & Consultants’ Executive Vice President Lainee Beigel: “This is all new territory,” but previous experiences can provide practical guidelines for the future.
Opinions expressed here are the author’s own.