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Looking Ahead - Emerging Trends in Employment Liability Insurance

The 2008 Edition of New Appleman Insurance Law Practice Guide features a new chapter, “Understanding Employment Liability Insurance” by L.D. Simmons and Lowndes Christopher Quinlan of McGuire Woods LLP. This excerpt from the chapter explores one of the most vexing issues in the application of Employment Practices Liability (EPL) Insurance: addressing multiple claims. Because of the frequency with which multiple claims arise, underwriters include a “related acts“ clause in EPL policies. This clause typically limits the insurer’s liability under two scenarios: (1) several employees file separate claims in response to an employer’s single action and (2) an employee files multiple claims based on the same employment action. Each scenario brings its own set of issues.
 
When an employment claim involves more than one claimant concerning a related act and the aggregate limit exceeds the per claim limit, the issue often becomes which limit applies. Given the paucity of EPL court decisions in this and many other matters, the authors analyze a decision of the Seventh Circuit, which is not an EPL case, but which does provide guidance as to how the related acts clause should be applied.
 
When one claimant files multiple claims arising from a single wrongful act, an issue may arise to the number of claims involved according to the insurance policy. A second issue may arise as to the timing of claims. Most EPL policies are written on a claims-made basis. Moreover, if the claimant files an EEOC administrative charge in one period and files a lawsuit in a subsequent policy period, the issue of the number of claims also can overlap with notice issues. The authors parse these problems in their chapter.
 
Another point of contention occurs when the employer has been engaged in a continuous course of conduct that started before the retroactive date of the policy and continues after that date. Is there coverage for such as claim under the policy when the policy is silent? The authors again turn to a non-EPL case for guidance.
 
In contrast, some EPL policies expressly provide that a continuous course of conduct beginning before the retroactive date and continuing after that date will fall outside of the policy’s coverage. But a claimant may assert that the policyholder-employer committed an independent act covered under the policy after the retroactive date. The authors examine such a case in their chapter.
 
The interpretation of EPL policies can be problematic and contentious. New Chapter 41 of the 2008 Edition of New Appleman Insurance Law Practice Guide consistently illuminates the issues that can arise and provides guidance from both policyholder’s and insurer’s perspectives.