In our litigious society, nearly every employer knows that it may become the target of a lawsuit by past, present or prospective employees. Even if a lawsuit is without merit, the costs of defending the lawsuit are significant in terms of time, lost income, and litigation expenses, including attorney and expert witness fees. As employees increasingly continue to attack the employment practices of their employers, the insurance industry is stepping up its efforts to provide Employment Practices Liability Insurance (“EPLI”) protection for its customers. EPLI helps protect the employer by covering defense litigation costs and providing liability coverage for all or part of a judgment that may be rendered adverse to the employer.
A well-designed EPLI policy can provide the employer with protection against employment related claims such as wrongful termination, sexual harassment, discrimination, negligent hiring or retention, defamation, invasion of privacy, Family and Medical Leave Act (“FMLA”), and Americans with Disabilities Act (“ADA”) claims. Traditional insurance policies, including “umbrella” policies, directors and officers liability policies, and workers’ compensation, generally exclude these employment-related claims.
There is no “standard” EPLI policy for employers. There are a number of insurance companies which offer EPLI policies and there are many variations in what different insurance companies will provide in terms of coverage, competitive pricing, and quality of legal representation. A significant consideration for the employer in selecting an EPLI policy should be whether the EPLI carrier will allow the employer to select counsel of its own choice to defend them (i.e., a defense law firm that specializes in labor and employment law). Many employers are not aware of a provision in nearly every EPLI policy whereby the insurance companies retain the right to select defense counsel. Not surprisingly, this fact is not always made clear to employers at the time the EPLI policy is purchased.
Unfortunately, the insurance carrier does not always select defense counsel who specializes in labor and employment matters when litigation arises. The result to employers is that cases are assigned to lawyers in some distant law firm having no prior relationship with the insured employer whatsoever, and no experience with the local courts and judges. In fact, all too often, an employer’s difficult and complex employment-related circumstance is pulled from the employer’s labor and employment lawyer who has handled the case up to the point of litigation, and is transferred to a new lawyer who lacks even the most basic knowledge of labor and employment law or of the employer’s business practices. Thus, employers frequently have to incur unnecessary costs while the newly assigned counsel starts over and becomes educated about a case that the employer’s labor and employment law attorneys have already lived with the employer. In short, many employers are not getting what they thought they bargained for in their EPLI claims, even though they are paying top dollar for coverage.
One means of avoiding this undesirable result is for the employer to specify its counsel of choice in the event of litigation at the time of purchasing the policy. It is important for an employer to make this selection when first purchasing or renewing a policy because, thereafter, insurance carriers often refuse to allow employers to choose counsel. If you are purchasing or renewing an EPLI policy, or even general liability coverage, be sure to insist on your counsel of choice early in the process.
For more information on this or any other labor and employment law topic, please contact Masud Labor Law Group at (989) 792-4499.
About the Author
Brian Swanson graduated from Wayne State University Law School where he received awards for academic excellence. While attending law school, Brian participated in Moot Court and also served as editor-in-chief. Brian received his undergraduate degree from Grand Valley State University in Allendale, Michigan. Before joining Masud Labor Law Group, Brian obtained extensive litigation experience in both state and federal courts as an associate with a Bloomfield Hills labor and employment law firm.
This article is published by the Masud Labor Law Group, and is intended as general information only. This article is not intended to provide legal advice or opinion, as such advice may only be given when related to specific fact situations. Questions or comments concerning this article should be directed to the Masud Labor Law Group, 4449 Fashion Square Blvd., Ste. 1, Saginaw, Michigan, 48603, (989) 792-4499. E-Mail: firstname.lastname@example.org. ©Masud Labor Law Group 2010. All rights reserved. Reproduction of this article in whole or in part, without express permission from the Masud Labor Law Group is prohibited.