Roughly three years ago, a team of Los Angeles Times reporters broke the story of USC gynecologist George Tyndall preying on hundreds of female students. The reporters won a Pulitzer Prize for their investigative work.
In March, the school agreed to pay more than $1.1 billion to former patients of Tyndall. It’s the largest payout ever in higher education.
In a letter, USC President Carol Folt said the settlement will be funded “largely through a combination of litigation reserves, insurance proceeds, deferred capital spending, sale of non-essential assets, and careful management of non-essential expenses.” She pledged to preserve the university's academic excellence.
That won’t be easy. The $1.1 billion, for context, equals roughly 20% of the university’s $5.7 billion endowment. Just how much of the tab actually gets picked up by USC’s insurers is unclear. The university’s General Liability insurance policy included an abuse or molestation exclusion, which is typical.
An Employment Practices Liability Insurance policy can help in some cases. EPLI covers businesses against sexual harassment claims and, depending on the policy, may cover defense costs in abuse cases.
Fueled by the #MeToo movement, the number of sexual harassment claims in the workplace has increased at a dizzying pace over the past few years. Although most of the suits are filed against large corporations, no company (or organization) is immune from employment practices lawsuits. Unfortunately, too few companies purchase EPLI because their owners believe they’ll never be sued.
The numbers on employment practices litigation suggest otherwise. Employment suits or claims have risen a staggering 400% over the past two decades – about half of which are brought against employers with 100 or fewer employees.
Employment Practices Liability policies provide protection against more than sexual harassment. They also cover:
- wrongful termination;
- breach of employment contract;
- negligent evaluation;
- failure to employ or promote;
- wrongful discipline;
- deprivation of career opportunity;
- wrongful infliction of emotional distress and,
- mismanagement of employee benefit plans.
An EPLI policy can also cover the costs of mounting a legal defense as well as judgments and settlements. Better still, EPLI covers your legal costs whether you win or lose. The better EPLI policies include punitive damages.
On the other hand, EPLI policies also often include “shrinking limits” provisions, meaning that any dollars that go to defense costs reduce the policy’s limits.
Exclusions in insurance contracts are always a minefield, so be careful here, too. These can include intentional acts and bodily injury exclusions, which may be what leaves USC to pay the biggest share of its settlement.
The cost and other details of EPL insurance
The cost of EPL coverage depends on a mix of factors including:
- how many people you employ;
- your history of past employment lawsuits;
- employee turnover;
- EPLI can be offered as an endorsement to a Business Owners policy (BOP), a General Liability policy, or as a stand-alone policy.
- EPLI coverage is typically written on a claims-made basis. This means the incident resulting in the claim had to occur during the coverage period. Because employment claims often come months or even years after the alleged incident, your company might be vulnerable if your insurance coverage was dropped or if tail coverage (liability insurance that extends beyond the end of the policy period) wasn’t purchased.
Finally, remember that EPLI coverage doesn’t give employers or their employees free reign to commit employment-related acts of harassment or discrimination. Employees and managers should be regularly trained in how to deal appropriately with others.
USC’s class-action settlement agreement require it to implement reforms to help prevent sexual and gender-based harassment. Those include instituting a pre-hiring background check for all new personnel, including physicians, and revising its performance reviews for identifying and reporting improper sexual conduct, among other measures.
Get more information about employment laws from the U.S. Equal Employment Opportunity Commission.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. Contact us at firstname.lastname@example.org or 480-730-4920.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.