Employment Related Liability- Update
Protecting Your Medical Practice from Employment-Related Liability in New York State
By Kate Sellers, JD, CLU, Vice President, Charles J. Sellers & Co., Inc.
It’s now been about two years since the #MeToo movement exploded. It’s clear 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. This is especially true in New York, where new laws addressing sexual harassment and discrimination in the workplace have made it easier for employers to be sued, and harder for them to defend themselves.
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. Small practices aren’t immune -- over 40% of all employment claims are brought against businesses with less than 100 employees. 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. Employment claims can include allegations of wrongful termination, breach of an employment contract, failure to promote, violation of anti-discrimination and harassment laws, wrongful demotion, and retaliation for making a claim of an illegal employment practice. And while sexual harassment scenarios are dominating 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.
New York State has responded to the #MeToo movement with legislation aimed at preventing sexual discrimination and harassment. Legislation passed in April 2018 required all New York employers to establish a written sexual harassment policy and to provide anti-sexual harassment training for employees by October 9, 2019 and annually thereafter. More legislation, signed into law in August 2019, made additional significant changes. For example, effective October 11, 2019, an employee suing for sexual harassment does not need to prove that the harassment is “severe or pervasive,” which is the current legal standard for a claim of hostile work environment. Certain defenses, long relied upon by attorneys defending employers, will no longer be permitted. For successful employee claimants, punitive damages and attorneys’ fees will now be available. And, effective February 8, 2020, the New York Human Rights Law’s prohibitions against discrimination and harassment in the workplace will apply to all employers (currently, these apply to employers with four or more employees).
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. 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, up to the policy limit, 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 provided that employers may be liable 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 can include 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 and changes in state law. Even if these issues aren’t occurring 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.