A pivotal moment for EPL insurance

A pivotal moment for EPL insurance | Insurance Business Canada

Professional Risks

A pivotal moment for EPL insurance

Legal inflation, discrimination and harassment, and M&A activity make client conversations critical

Professional Risks

By
Jen Frost

Insurance Business sat down with Sovereign Insurance management liability senior underwriter Eduard Lecker, who will be sharing insight at an October 16 webinar, to discuss EPL insurance trends that brokers need to keep on top of amid a barrage of emerging workforce challenges.

Brokers well know that employment practices liability (EPL) insurance is a vital piece of the puzzle for executives where it comes to minimizing the impact of employee litigation, and emerging workplace challenges and trends are making conversations around this type of cover perhaps more critical than ever.

In the words of Eduard Lecker (pictured), Sovereign Insurance management liability senior underwriter, operating a business without EPL insurance would be like “buying a building and not having any property insurance.”

While the property insurance market is wrestling with the impact of natural catastrophes, businesses and EPL underwriters are facing a brave new world where it comes to potential booming legal exposures.

The good news for clients is that the EPL insurance market has been stabilizing. Directors and officers (D&O) rates soared during the pandemic and some businesses struggled to access cover, as underwriters priced for big ticket COVID and layoff claims that did not materialize to the extent initially feared. EPL has since benefited from an industry-wide D&O loss ratio of around 40%, which has led to some softening, according to Lecker.

“It’s going to be a lot easier for brokers to access EPL coverage over the next couple of years,” Lecker predicted.

Legal inflation, DEI issues, and post-pandemic changes are reshaping the employment landscape

This softening comes at a critical time.

Legal costs have experienced inflation, as have most goods and services. Employers can accumulate legal costs, such as lawyers fees, expert charges, mediation costs, etc., even if litigation is found to be frivolous.

There has also been a rise in higher earners bringing lawsuits against their employers, which can substantially add to potential payouts.

“Historically, a lot of claims came from lower earning employees, because they were more likely to be subject to layoffs,” Lecker said.

Diversity, equity, and inclusion (DEI) initiatives may be reshaping Canadian industry into a fairer place, whether through a move towards more equal pay or greater understanding of different employee needs, but enhanced focus on this has also led to exposures.

Discrimination and harassment claims, in addition to wrongful termination and retaliation cases, are driving the bulk of claims, according to Lecker. It is now imperative that every organization has solid DEI protocols, even though it may not have been such a great focus for the organization in the past.

All this comes as employers get to grips with the aftermath of the COVID-19 pandemic. COVID claims may now make up a much smaller proportion of EPL cases, but the advent of remote work has left employers less able to monitor employee behavior, while some staff may be left feeling isolated.

Meanwhile, those employers that have landed firmly on the side of back to work policies may also find themselves grappling with dissatisfied individuals and greater turnovers. 

An increase in post-COVID mergers & acquisitions (M&A) activity has further added to legal action potential, with some joined up companies more likely to look to layoffs.

EPL risk mitigation strategies are critical in the face of fresh challenges

These emerging challenges make it vital that firms engage with risk mitigation strategies, and their trusted brokers should be leading the conversation and on hand to help them through this.

This could mean accessing advice from HR professionals and consultants, in addition to employment law specialists.

Having procedures in place can help minimize the risk to employers. Organizations should look to employee handbooks and visible policies on discrimination, as well as making sure accommodations are in place for staff with diverse needs.

Meanwhile, brokers must remain vigilant and review policy terms and conditions to make sure that client needs are properly addressed and cut down Errors & Omissions (E&O) risk to their own brokerages.

To help brokers get up to date with today’s EPL insurance landscape, Sovereign Insurance will be hosting a webinar on October 16, 2023.

Brokers will be able to tap into the expertise of Lecker and Sovereign Insurance manager, national professional lines Andrew Linsky, who will talk them through and take questions on these key points:

Increased litigation and claim risk, which has made it increasingly imperative that the insurance industry promotes EPL insurance and risk prevention and mitigation tools.
The adoption of legal counsel services, and how these can help an insured.
The importance of mandated policies and procedures and how rigorous employee handbooks can help cut down on unacceptable behavior due to abuse and discrimination being key risks
Vetting consumers’ concerns to understand how to take the best approach to this and avoid potentially debilitating or costly omissions.

To register for this virtual event and skill up on EPL insurance, click here. 

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