COVID-19's Impact on Employment Practices Liability

Had a great catch-up call with our friends across the pond (Beazley) and Donna Davis (Allegiance Underwriting Group) yesterday.  Below is a summary of what they see from an EPL perspective. Beazley is continuing to monitor COVID-19 claims, which seem to fall into the following categories:

1. General notices of a Reduction in Force from Insured. These typically do not rise to the level of a Circumstance or Potential Claim under the Policy, so they will likely be denials.  However, most policies have Employment Event coverage, and a notice of a RIF may qualify for coverage under the Employment Event sublimit.

2. Employees alleging that they were discriminated against, retaliated against or wrongfully terminated as a result of voicing concerns or making requests regarding COVID-19.

3. Third Party discrimination against Asian-Americans.

Beazley anticipates an increase of COVID-19 related claims in the coming months, particularly the following types of claims: discrimination, wrongful termination, failure to rehire and violations of the FMLA and/or the Families First Act. Beazley has noticed an increase in Insureds who are unwilling or unable to pay amounts for defense or indemnity within their SIR due to financial difficulties in the current environment. Beazley is working to try to settle older or nuisance value claims in light of the current environment, using either direct negotiations or virtual mediations. While we have had some success, we have also faced some challenges, particularly from Insureds in high risk industries.

Area of concern – in California, plaintiffs’ counsel are telling defendants to demand that the carrier waive its retention in light of financial difficulties.   Also, resistance to settle on the part of the insureds, including an overall climate of inertia, insureds not wanting to be the first to reach out for fear of appearing weak, and insureds being unwilling or unable to pay amounts within their SIR due to the current economic crisis. Finally, Beazley is starting to consider whether PEO’s & Staffing Firms need a revised strategy in reaction to COVID-19 and the pending recession. It will (hopefully) be nowhere near as severe as the significant changes they are making to the rest of their EPL book.Beazley has begun asking PEO’s the following questions as they renew their EPL:

1. Does the PEO work with their client companies on ensuring they have an effective Business Continuity plan that includes pandemic?

2. Does the PEO offer advice to their clients regarding the capabilities of leased employees working from home and whether there is a uniformed approach for all?

3. Has the PEO put protocols in place for worksite employees that are or have been infected by COVID-19 or a similar virus, as well as ensuring they are not discriminated against?

4. Does the PEO ensure they are consulted with before any RIF, lay-off, downsizing? Including a review process so protected classes will not be adversely impacted as a result?

5. Is the PEO assisting all of their clients on the “Families First Coronavirus Act”?

 For any additional questions or comments, please reach out to Donna Davis at ddavis@allegianceunderwriting.com / 813.601.0894   

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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.

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