Fisher Phillips PeopleLaw Conference 2024: Key EPLI Takeaways
Again this year, I was honored to not only attend, but be a part of a presentation on Employment Practices Liability Insurance (“EPLI”) at the Fisher Phillips Peoplelaw Conference last month. The conference was excellent in its entirety, and it was very cool to be a part of a panel with experts Michelle Gordon of Markel and Alyssa Pianelli of Aon. There are few that have the depth of experience in this super specialized line of insurance that they do.
For an hour we reviewed the current state of the EPLI market with special focus on market trends and things to watch in the coming year. The below is meant to summarize some of the key topics that were reviewed, but man - there was a lot of good conversation!
KEY TAKEAWAYS
• Obtaining the correct EPL insurance is key crucial. Understanding the differences between PEO (Professional Employer Organization), Staffing and EOR (Employer of Record) can help tailor your coverage to specific needs and risks, especially when there are multiple business models in play for a given group. Some staffing forms in play in the overall market are built for single employers and therefore, unless the PEO is named (versus just client company), the coverage does not trigger.
• Understanding if a client company has an existing EPL policy, and if so, how that policy integrates with the policy of the PEO is paramount in ensuring “continuous coverage”. Differences in coverage, limits, retro dates, and which policy is primary versus excess in providing coverage are some of the more important items to consider when moving a potential client from their own policy to that of the PEO. All the master policies for PEO that I know of are written on a claims made form. A claims made policy provides coverage that is triggered when a claim is made against the insured during the policy period, and the wrongful act that gave rise to the claim must have taken place on or after the retroactive date. The retroactive date is the start date of when something could occur, but the claim as defined in the policy also has to be made within the policy period. It is as it sounds - confusing - and really needs separate attention and review to get it right and not create potential gaps in coverage.
• A well-defined Client Service Agreement (“CSA”) will dictate what “extended coverage” the client company is provided from an EPL perspective, and it was suggested the EPLI policy of the PEO not be shared with client. Crafting a CSA to protect the named insured (PEO or Staffing company) from unwarranted claims is a common practice. The clarity in agreements can contribute significantly to risk mitigation and protection for all parties involved. The PEO coverage should be broad but is often limited to the client company based on items like tenure of the relationship and time a claim occurred. This is extremely important in an effort to keep losses and thus premiums stable for the overall pool of coemployers.
• Often times, especially with larger client companies that have retained their own EPL policy in the past, choice of counsel can be very important in the buying decision. While the Master policy for a PEO is designed to cover both the PEO and the client company, the named insured is the PEO and they and their carrier ultimately have direction and control over the decision of which counsel is to be used. To be real, in most cases, if a client wants their choice of counsel it is suggested they purchase their own EPLI with them as the named insured to make sure they are able to fully direct their own claims. There are very few labor counsels that understand and specialize in PEO and these types of policy forms, and hiring one like Fisher Phillips makes a tremendous difference.
• There’s much discussion as of late on the slippery slope with ‘Duty to Defend’ when there are multiple allegations, some of which would not be covered by the CSA. It is usually best practice to always advocate for a duty to defend, but with defense fees being racked underneath six-figure deductibles in troubled states like California and New York, there are new opinions on how to deploy. It’s valuable to have a clear understanding of how the Duty to Defend is articulated in the agreement to address situations where some allegations might not fall under CSA coverage.
• The current EPLI marketplace is stable and appears to be profitable for the historic and new participants as has been evidenced by relatively flat renewals. Underwriters are being very creative in using underwriting strategies to include different retentions based on individuals, client companies, zip codes, wage bands, NAICS groupings, and employee count.
• While nothing of note yet, it’s only a matter of time before AI models deployed in the PEO space are challenged. Current potential exposure comes from applications in insurance and hiring. On the insurance side, the usage of intangible/unknown data to price health insurance and workers’ compensation. Additionally, the usage to profile/identify “problem claimants” and fraud. Hiring appears to be under the most scrutiny thus far with unknown algorithms making decisions that may not be compliant with acceptable hiring protocal on State and Federal levels.
• The recently approved law regarding Employee or Independent Contractor Misclassification is focused on “The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections. This final rule will reduce the risk that employees are misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves.” How this all flows down into things like classification of an employer-employee relationships for the purposes of being a “covered employee” will be of interest, especially in areas of “People Insurance” such as workers’ compensation, health insurance and EPLI.
A lot to watch out for in 2024!
Author: Paul Hughes
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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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