There has been a lot of discussion as of late regarding the impact of COVID-19 on Workers’ Compensation, Business Interruption, Health Benefits, etc., but what about Employment Practices Liability? Below is a great overview of the ever changing landscape of EPL due to COVID from our friends at Beazley.
Around the world, governments responded to the COVID-19 pandemic in March 2020 by implementing various restrictions on the movement of people through quarantines, lock-downs, stay at home orders, and other similar measures. Businesses, particularly those in the service and retail industries, were most affected by these measures. People were staying home, which meant no customers: No diners at restaurants. No shoppers in the malls. Nobody getting haircuts, manicures, pedicures, or massages. Many of the affected businesses have either announced permanent or indefinite closures or reduced service, and consequently, have had to furlough, layoff, or permanently terminate the employment of hundreds of thousands of employees.
Many businesses with financial difficulties are Client Companies of PEOs. As a result, with both new and old Claims, Beazley has noticed an increase in Client Companies unwilling or unable to pay amounts for defense or indemnity within their SIR. For Client Companies facing an uncertain financial future, they are unwilling to engage in settlement negotiations or mediation. Rather than committing their limited resources to settlement, Client Companies want to preserve or use those funds to keep their businesses running by paying employees and other overhead expenses that remain despite reduced business income. Unfortunately, there are also some Client Companies whose businesses will not survive; and they are simply unable to fund amounts of settlements within their SIRs. There is no one size fits all solution. All Insureds have differing limitations; and Beazley has been working collaboratively with its PEOs and Client Companies Insureds to strategize the best approach to resolving each claim in this COVID-19 environment.
Moving forward, Beazley anticipates more COVID-19 related claims including:
- Claims for violations of the Family Medical Leave Act (FMLA) and/or the Families First Coronavirus Response Act (FFCRA) for discrimination, retaliation, wrongful termination, or failure to rehire for voicing concerns or making requests regarding COVID-19, missing work to recover from (or care for another with) COVID-19, etc.
- General notices of mass layoffs or reductions in force. (Note: Typically, coverage is unavailable, but in certain circumstances, an Employment Event sublimit coverage may be available.)
- Third Party Discrimination against persons of Asian descent.
As part of the renewal process, Beazley is considering PEOs and Staffing Firms’ strategies to addressing COVID-19 and the COVID-19 induced recession. Some of Beazley’s questions are:
- Does the PEO work with their Client Companies to ensure they have an effective Business Continuity Plan for COVID-19?
- What protocols do the PEO and their Client Companies have if worksite employees are or were infected with COVID-19?
- Are Client Companies required to consult with the PEO before any terminations, and layoffs, reductions in force, or downsizing?
- What support does the PEO provide their Client Companies with to comply with employment laws, including the FMLA and FFCRA?
- Does the PEO offer advice to their Client Companies regarding worksite employees working from home?
To hear more about the impact on Employment Practices Liability due to COVID-19, please join NAPEO’s EPLI Webinar, this Thursday July 16th, 12pm ET. Libertate’s own President, Paul Hughes, will be moderating.
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The PEO Compass is a friendly convergence of professionals and friends in the PEO industry sharing insights, ideas and intelligence to make us all better.
All writers specialize in Professional Employer Organization (PEO) business services such as Workers Compensation, Mergers & Acquisitions, Data Management, Employment Practices Liability (EPLI), Cyber Liability Insurance, Health Insurance, Occupational Accident Insurance, Business Insurance, Client Company, Casualty Insurance, Disability Insurance and more.