By Kathleen Sellers, JD, CLU
Vice President, Charles J. Sellers & Co., Inc.

The last year has seen near-constant revelations of sexual misconduct by high-profile individuals, such as Harvey Weinstein, Matt Lauer, and Charlie Rose, in the workplace, giving rise to the “#MeToo” movement.  This movement has emphasized that all employers and supervisory employees have to work to prevent and address sexual harassment, which has existed for too long in many workplace cultures.  While being mindful of these responsibilities, business owners and managers also need to consider the potential financial ramifications for our own businesses and workplaces.  Employment lawyers are anticipating that the heightened social awareness around these issues is likely to drive up the frequency and costs of employment related litigation for all employers.

Healthcare businesses need to be aware of the potential for employment-related claims.  According to the US Liability Insurance Group, a medical practice is more likely to have an employment claim brought against it than a general liability claim, and over 40% of all employment claims are brought against businesses with less than 100 employees.  Employment practices claims can include allegations of wrongful termination, breach of an employment contract, failure to promote, violation of anti-discrimination and harassment laws (such as Title VII of the Civil Rights Act, state, or local laws), wrongful demotion, and retaliation for making a claim of an illegal employment practice.  And while sexual harassment scenarios are claiming headlines now, employees may bring claims of discrimination or harassment on the basis of race, national origin, religion, pregnancy, age, disability, and sexual orientation, as well.  The typical power structure in many medical practices – with mostly male physician owners and mostly female staff – results in a heightened risk of actual or alleged wrongful conduct in medical practices.

Medical practices, like other businesses, need to take action to establish a fair and safe workplace culture, by making sure that anti-harassment and discrimination policies and practices are in place, and that all managers and staff are trained to prevent and address improper workplace conduct.  Legislation passed in April requires all New York employers to establish a written sexual harassment policy and provide anti-sexual harassment training for employees, effective October 9, 2018.

But even the best policies and procedures can’t prevent all employment practices claims, which is where Employment Practices Liability Insurance (EPLI) comes into play.  This insurance covers the cost of a judgment or settlement in an employment related claim, as well as paying defense costs, which in many employment-related claims, exceed the eventual judgment or settlement (if there is one).  Coverage for these types of claims is excluded from Workers Compensation and standard Business Owners Policies (although some Business Owners Policies may include or add on some Employment Practices Liability coverage).  Employment Practices Liability coverage can be purchased on a stand-alone basis, or as part of a management liability package that can include Directors & Officers Liability coverage (for claims brought in connection with other wrongful acts or omissions by management) and/or Fiduciary Liability coverage (for claims against fiduciaries of employee benefit plans).

EPLI policies can also include coverage for claims of harassment or discrimination brought by third parties, such as patients or customers and vendors (for example, a pharmaceutical representative who visits a medical practice).  This coverage is more important than ever for businesses in New York.  The 2018 budget legislation expanded the potential liability of employers to include liability to (non-employee) third parties, if the employer knew or should have known that the third party was being harassed and did not take corrective action.

US Liability Insurance Group offers a policy that we have put in place for many of our customers that is specifically designed for medical practices, and it includes coverage for defense costs for claims of patient molestation (availability of this coverage varies by medical specialty).  As a valuable add-on, most EPLI policies also provide access to services to help a business prevent or mitigate loss from an employment practices claim.  These include sample employment policies, on-line anti-sexual harassment prevention training, a set amount of free consultation with a lawyer or human resources professional, and other smart hiring resources, such as discounts on background checks for job applicants.

When purchasing an EPLI policy, a business should consider what limits to purchase (many of our customers purchase a $1,000,000 limit), as well as the deductible and premium offered by the insurance company.  In some policies, the costs of defending the claim are subtracted from the overall limit available for a judgment or settlement (this is referred to as defense “within” or “inside” the limit), while with others, defense costs are covered in addition to the limit (referred to as “outside” the limit).  EPLI policies are written on a claims-made basis, which means that they cover claims made during the policy period, subject to the retroactive date.  Claims based on acts that took place before the retroactive date are not covered.  If coverage is offered on a “Full Prior Acts” basis, there is no retroactive date, which means that more claims may be covered.

EPLI coverage is now more important than ever for the financial protection of medical practices, with the increased attention being brought to harassment in the workplace.  Even if these issues aren’t a problem in your practice, a disgruntled employee can sue your practice, alleging discrimination or harassment.  An EPLI policy can help your practice survive the financial impact of such a claim.