By William D. Dyer

The work force is ever changing especially during these tough economic times that have resulted in a rise in employment claims and litigation. Big and small business owners need to protect themselves with EPLI or Employment Practices Liability Insurance that covers them for exposures relating to employment (i.e. discrimination, wrongful termination et al). Business owners don’t have the resources to battle these cases on their own, nor are they prepared to implement risk management practices to avoid them. Obtaining business employment practices liability insurance will cover litigation expenses alleged by anybody from the employee to the third party. EPLI premiums are affordable, with minimum premiums that can be less than $1,000. Here are some facts worth noting that should influence small business owners in the right direction, taken from June 2010′s issue of Best Review.

• Hartford Steam Boiler found two out of three [small business owners] were concerned that their employees will file an employment-related charge against them with only a fraction, who have some type of insurance protection for workplace claims.

• U.S. Equal Employment Opportunity Commission reports that employment claims reached the second highest level ever in 2009, with more than $376 million awarded to employees.

• EEOC statistics also show 81% of claims settle for an amount ranging from $22,400 to $40,500 (excluding defense costs).

The time is now to protect your company from employment claims. Don’t wait, because if you get sued then it is too late to buy coverage to cover that claim. A significant employment or workplace claim can be the tipping that can be the ruin of your business.

HCP National is an Employment Practices Liability, EPL, or ELPI provider or broker for over 16 years. As an EPLI broker we know the risk exposures of employment, and we know how to insure it. This blog does not alter or change coverage, nor is meant as legal advice.

Here are the 2009 Stats: (per the Employee Benefit Adviser, Feb. 2010)

• 93,000 workplace discrimination charges filed with the EEOC

• Age related claims were the second highest, resulting in 22,772 total awards, adding up to $72 million

• 21,451 ADA claims, up 10% from 2008

• Charges alleging discrimination

All of this can be mitigated through training. Human Resource cannot be everywhere. It is the supervisors and managers who need to be trained and reinforced on FMLA, EEOC, ADA and Harassment compliance because they are legally liable, which means a judgment can be levied on them. If a supervisor or manager knew it was their house and savings on the line, how quickly do you think they would want to learn?

With the new economy and those over 60 staying employed, it is imperative that all those who have any managerial power, in an enterprise, are trained and kept up to speed on HR Compliance. Profits can be eroded by the right lawsuit that goes uncovered by EPLI.

HCP National is a Compliance Educator and trainer in FMLA, FEHA, CFRA, EOC, OSHA, IRCA, Section 125, COBRA and more, as well as a full service health insurance brokerage company whose home office is located in Orange County, CA. We do not give legal or tax advice since we are not attorneys or CPA’s.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDUM ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND ISN’T COVERED.

The old adage holds true: a person who represents himself/herself in a legal battle has a fool for a client. The same applies to medical malpractice insurance. Unless you want to spend years learning insurance brokering, it is best to consult an expert malpractice broker. The brokers are paid the same commission, which is typically 10% (in some cases 15% to 20%). This is built into the price of the insurance, thus it costs you nothing directly. Also, if you go directly to the insurer, skipping the broker, the insurer will not reduce the premium by the broker commission since it is built into the price. Again, having a broker will not cost you anything.

A good broker also can shop your insurance to make sure you have the best deal. They can be an advocate with your insurer if you have issues with them. They also can explain how your coverage works.

The challenge is how to find an expert broker in medical malpractice insurance in the California market. You need to find someone who is ethical and will look out for your interests. I wish a prospect for insurance could sit in our office for a week and see how hard all of us work to do the right thing, because there are many competitors who do not.

Finding a good broker:

• Ask a colleague who he/she uses

• Respond to a mailer asking the company for the name and number of their Norcal or Medical Protective representative. Call the company marketing representatives at Norcal and Medical Protective to confirm that the company is appointed with both insurers. This is a good indication that the broker does a lot of medical malpractice work and that they have been vetted by these insurers.

Note: I do not mention The Doctors Company (TDC); since they appoint very few agents and those they do appoint are often direct writers (can only place with TDC). So the fact that the agent does not have an appointment with the TDC does not indicate that he/she is not an expert in medical malpractice. Also, a non appointed broker can give you a TDC quote through an intermediary.

• Once you have spoken with Medical Protective and Norcal, ask the broker how many clients he/she has currently. You want someone with 50 or more clients, which indicates his/her expertise. Then ask for access to a list of all his/her insurers that he/she can go to on your behalf.

How do I know my broker is doing the right thing by me?

• If you are in the standard market (TDC, Norcal and Med Pro), you have the cheapest deals. These standard insurers are the lowest cost insurers and have the best terms, so in most cases there is no reason for the broker to shop for your insurance coverage since you have the best deal. If you are in the non standard insurance market, then your broker should shop for your insurance coverage every year, as well as try to help you re-apply into the standard market with the hope that it will accept you.

• Assuming you are in the expensive, non-standard market, you want your broker to go to at least 5 to 8 insurers. You want a list of the responses and quotes if applicable. Also, if you want proof of inquiries, ask for evidence like emails or letters the broker received from the underwriter or intermediary.

• Check all quotes to ensure your specialty is listed and your retro date is included. Sometimes underhanded sales people will sell coverage with no retro date. We had a client who left us for a cheaper deal, which he received as a result of his new broker dropping his retro back to 2004. Any person who was harmed prior to the effective date of the doctor’s cheaper policy can sue the doctor today for a past event, and the doctor will not be covered.

• Look at the fees that you are charged. Brokers are permitted to charge fees, but they must identify them as a broker fees. Most range from $350 to $500. There is a broker who we have encountered, who charges not only the usual fee, but also numerous other fees calling them processing fees, policy fees et al. Inquire about these fees and if the broker does not give you valid reasons for the charges, find a new broker. This broker received the normal 10% commission plus broker fees disguised as something else, running away with 30%-50% on a deal which is obscene and disgraceful to our profession.

• Watch out for brokers offering Risk Retention Groups (RRG’s). These are deals where you are part of a self insured deal. They will say they have reinsurance and other items of security. But in reality if they run into financial problems they can come back and ask for more money, more than the premium that you paid, and you have to pay as much as they need. We had a client who joined RRG’s, before coming to us, who went bankrupt and had to pay over $250,000, including legal fees, to pay what he owed the RRG. If you come across brokers who offer this option and do not tell you the truth about the downside of an RRG – RUN! Buy from a real insurance company where you pay your premiums and that is all you owe.

Do I need more than one broker?

• If the above criteria are met, then no you do not need more than one broker. Allow the person, who is doing the right thing to do his/her job and you will develop a relationship with that broker. If he/she does not meet these criteria, then find a new broker. If you want more than one broker to bid for your insurance, then choose two. Have this outside broker shop 30 days prior to your renewal date and not any sooner. If your current broker is truly shopping your insurance, then he/she should have started 30 days prior to your renewal date. The insurance companies release quotes to the first person who submits his/her risk to them. Those who come later are denied access. If your broker is doing his/her job, this outside broker should be denied a quote. When this happens the outside broker may call you asking for a broker of record letter, which is a signed document from the insured stating that a broker or agent is representing the insured. Do not grant this! Conversely, if the current broker finds he cannot access all his insurers that he/she went to, and if he/she comes asking for a broker of record letter, do not grant this either! If your current broker did his/her job properly, then he/she should have submitted your risk to all the insurers prior to the 30 days. You may also receive a call by either broker saying that it’s bad to have another broker (all sales talk). You will get calls saying, “I am blocked” (not a lack of fiber). It means your current broker or the outside one did the job properly, therefore do not undermine him/her by issuing a broker of record letter.

• If a broker brings you his/her bid that he/she put hours of work into obtaining without any compensation (since brokers do not get paid till they get your order to place the coverage), then please do not give his/her quote to someone else. This is not a good business practice, nor is it ethical. We all have families to support and businesses to run. This is a small market thus you will get a bad reputation for doing this, and no reputable brokers will work with you again.

HCP National is not a law firm and does not provide legal advice. We are a medical malpractice insurance broker and risk manager.

Employment Practices Liability (EPL), also known as Employment Practices Liability Insurance (EPLI), provides coverage for employment-related suits brought against Companies, Directors and Officers, as well as other employees arising from actual or alleged Discrimination, Wrongful Termination, or Harassment.

Claims are brought by:
• Current or Former Employees
• Applicants for Employment
• Third Parties (Non-employees, i.e. customers)
• Governmental Agencies (EEOC)

Insurable Costs included in the EPL policy:
• Legal Fees (for both the Company and Insured Persons)
• Damages (include some limited Punitive Damages )
• Settlements (includes the plaintiff’s attorney expenses)

Employment Practices (EPLI) Wrongful Acts include actual or alleged:
• Violation of any common or statutory federal, state, or local law
prohibiting any kind of employment related discrimination
• Harassment, including any type of sexual or gender harassment
• Abusive or hostile work environment
• Breach of an actual or implied employment contract
• Wrongful deprivation of a career opportunity, wrongful failure or
refusal to employ or promote, and wrongful demotion
• Employment-related defamation, libel, slander, disparagement,
false imprisonment, misrepresentation, malicious prosecution or
invasion of privacy
• Wrongful failure or refusal to adopt or enforce workplace or
employment practices, policies or procedures, solely as respects
employment-related discrimination or harassment
• Wrongful discipline
• Employment-related wrongful infliction of emotional distress,
mental anguish or humiliation
• Retaliation
• Negligent evaluation, negligent hiring, or negligent supervision of
others in connection with any of the above points

Limit of Liability and Premiums for EPL
Capacity has increased with Limits available from $1,000,000 to $20,000,000 for EPLI.
Minimum premiums – $2,500 annually for Privately Held companies with 5 or fewer employees.

The above is a limited discussion of EPLI. HCP National is an EPL, ELPI insurance provider, or broker. This blog does not alter or change coverage, nor is meant as legal advice. HCP uses Rubicon Insurance Services as its service partner. http://www.rubiconins.com/