e typically define an emerging risk in one of two ways:
- A new risk that did not previously exist
- A change occurs causing a either an increase in frequency or an increase in severity
Employment Practices Liability is again an emerging risk for the healthcare industry. The second half of 2012 and the first of 2013 have yielded an increase in these types of lawsuits by employees against an employer. There are a variety of reasons why these types of lawsuits are on the rise, but coupled together create a significant increase in frequency for employers in healthcare:
- Poor economy
- High percentage of unemployed or underemployed workforce
- Aging workforce
- Financial challenges of non-profit hospitals
- Disgruntled employees
- Frustrated employers
- More third parties in employer’s businesses
What exactly is an employment related practices lawsuit and doesn’t my liability insurance cover this? A few examples of these types of claims include: Sexual Harassment, Wrongful Termination, Age Discrimination, Wage + Hour lawsuits, etc…
A General Liability Insurance policy typically will not provide coverage for these types of lawsuits. Some insurance companies are now adding this coverage (usually a small sublimit of $10,000 or $25,000) to businessowner’s or package policies. Not all EPLI policies/endorsements are created equal and it is important to review the policy. A few questions to help be prepared are:
- How much coverage is on my current policy? Is it possible to purchase more coverage?
- Does this policy cover 3rd party claims or wage + hour claims?
- Do defense costs (attorney fees) reduce the limit of liability?
This coverage can be a bit more expensive than most expect it to be (because of the risk is real and on the rise!). If buying a stand along $1,000,000 (or higher) policy is not in your budget, some popular alternatives/strategies to help reduce premium cost include:
- Having a policy with a higher deductible (for example $10,000).
- Buying a lower limit of coverage at $100,000 or $250,000.
- Purchasing a policy to cover some, but not all types of claims – for example maybe you purchase a policy without 3rd party coverage or without coverage for wage + hour claims.
It is clear this type of lawsuit is on the rise and will only continue to be more frequent in healthcare. In most cases some coverage is better than no coverage. The amount and type policy that is right for your business will depend on many factors and probably some tough choices for you. Become aware, informed and educated on this risk as it may knock on your door in the future.