We often receive questions from clients regarding when they should file a potential Employment Practice Liability Insurance (EPLI) claim. In this article, we will explore the importance of promptly reporting any employment actions or threats to your insurer and discuss why it is crucial to work with a skilled broker like BimaKavach who specializes in these policies.
Understanding EPLI Coverage:
Before delving into when to file a potential EPLI claim, let's first comprehend what this coverage entails. Employment Practice Liability Insurance provides protection against claims brought by employees alleging wrongful acts such as discrimination, harassment, wrongful termination, and other workplace-related issues.
Prompt Reporting is Key:
The first reason why you should quickly notify your insurer about any potential employment action is that most EPLI policies require the insured party to report "any potential threat or notice of a potential claim" as soon as practicable. Failure to comply with this requirement may jeopardize your chances of receiving coverage for the claim later on.
Coverage for Defense Costs:
Additionally, timely reporting ensures that you have access to coverage for defense costs included in your EPLI policy. These costs encompass legal fees incurred while defending against threats or lawsuits initiated by employees. By involving your insurer early on, you can avoid paying out-of-pocket expenses unnecessarily and potentially compromising the handling of the claim according to policy guidelines.
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Potential Risks of Hiring Your Own Attorney:
Some business owners might be tempted to hire their own attorney instead of relying on their insurance company's legal representation due to concerns about deductibles and perceived frivolous lawsuits. However, taking such action without consulting your insurer can lead to unforeseen complications down the line.
By engaging an attorney independently before notifying your insurance company, you risk encountering difficulties surrounding complex policy wording associated with claims handling. This misstep may ultimately impact how effectively and efficiently your case is managed, potentially leading to increased costs and prolonged litigation.
The Consequences of Delayed Reporting:
Business owners who delay reporting a potential employment claim often find themselves in a bind several months later. Claims they thought could be quickly dismissed or resolved inexpensively can escalate into significant problems. In such cases, it becomes crucial to inform the insurance company promptly, filing a formal notice of claim while hoping that it's not declined due to late notice or prejudice.
Factors Influencing Claim Outcomes:
Ultimately, the severity of the claim, timing of the notice, and overall relationship between you as the insured party, your broker, and your insurance company will impact how smoothly these situations are handled. While many instances do result in covered claims under EPLI policies when properly reported, it's vital to recognize that finding yourself in this position is far from ideal. It can be uncomfortable and costly if litigation takes an unexpected turn.
Concerns about potential rate increases may dissuade some business owners from filing claims if nothing comes of them. However, unlike personal auto insurance policies where small damages can often be paid out-of-pocket without affecting premiums significantly; employment claims have significantly higher stakes.
An employment claim has the potential to evolve into a major lawsuit for your organization — one that requires careful handling by following all procedures outlined in your policy contractually. It is better to handle any potential threat diligently than risk being surprised months down the line when defense expenses aren't covered by your insurer.
Reporting Potential Circumstances vs Filing Claims:
If you report circumstances that could potentially lead to a claim but no action ensues after investigation or mediation attempts are made internally within your organization; chances are you won't face higher rates upon renewal. On the other hand, should litigation occur resulting in dismissal with little payment or falling below deductible thresholds; negotiating flat renewals might still be possible based on individual insurer agreements.
Working with BimaKavach:
Given the complexity of EPLI policies, it is advisable to work with a skilled broker who specializes in handling these types of insurance