COVID-19 Raises Various Employment Practices Liability Insurance Considerations

The Basics of EPLI Coverage

EPLI coverage is designed to cover losses the employer becomes legally obligated to pay in connection with EPL claims alleging a "wrongful" employment-related act or practice. Many EPLI policies cover similar forms of employer misconduct vis-à-vis employees, including, but not limited to:

• Employment status claims. EPLI policies often cover an employer's alleged wrongful termination, demotion, evaluation, or failure to promote an employee.
• Discrimination claims. Employees asserting the employer discriminated against them as a member of a protected class or that supervisors engaged in harassment or bullying can trigger EPLI coverage.
• Privacy rights claims. EPLI programs routinely respond to employment-related defamation lawsuits or alleged employee privacy rights violations, including unlawful disclosures of an employee's confidential medical or financial information.
• Negligence claims. EPL claims alleging the employer was negligent in failing to adopt or implement employment-related policies and procedures, including the failure to train employees, can also trigger EPLI coverage.

Each insurer markets EPLI policy forms with distinct wording. Whether an employer can recover EPLI in response to an EPL claim will depend on the specific wording of the policy (and its exclusions prohibiting coverage), the allegations set forth by the employee, and the damages sought.

COVID-19 Employment Claim Risks

At the outset of the COVID-19 pandemic in the United States, employers quickly developed and implemented remote working protocols to protect the health and safety of employees able to work from home. With shelter-in-place orders and other gathering restrictions expired or lifting and as more employees return to workplaces throughout the country, employers may see an increase in EPL claims alleging COVID-19-related wrongful employment acts. Potential claims include a number of scenarios for which EPLI policies could provide coverage:

• A returning employee alleges he or she contracted COVID-19 at the office as a result of the employer's inadequate workplace policies and practices. Though EPLI policies do not commonly bar coverage for specific viruses, most policy forms contain "bodily injury" exclusions for "physical injury" to the body, "sickness," or "disease." In addition, many EPLI policies may exclude losses resulting from violations of the Occupational Safety and Health Act ("OSHA") or similar workplace safety regulations and for claims otherwise protected by the employer's workers' compensation program.
• An employee alleges that an employer had failed to provide legally required protective equipment and/or retrofit the workplace, resulting in enhanced risk of exposure to COVID-19. Many EPLI policy forms exclude coverage for costs incurred to comply with injunctions and equitable relief, such as claims demanding accommodations for disabled persons under the Americans with Disabilities Act ("ADA") or to repair unsafe workplace conditions. However, a claim alleging the employer took a retaliatory act against the employee for reporting a failure to mitigate COVID-19 risks could be covered depending on the insurance policy language and facts.
• An employee alleges that, in connection with the employer's contact-tracing efforts, the employer disclosed to others that the employee was positive for COVID-19, in violation of ADA privacy protections. EPLI policies often respond to alleged invasions of privacy and violations of an employee's civil rights with respect to unlawful disclosures of health information or disability, including the employee's rights under the ADA.
• An employee alleges retaliation after being discharged for refusing to comply with the employer's COVID-19 policies to combat the spread of the virus. Though EPLI policies may specifically exclude claims made under OSHA and other employment safety regulations, retaliation claims against employees for exercising rights under those laws often remain eligible for EPLI coverage.
• A group of employees allege that the employer's management misrepresented the severity of COVID-19 health risks in specific workplace environments or failed to take reasonable steps to improve workplace conditions through cleaning and disinfecting office spaces. EPLI policies can respond to claims asserting the negligent hiring, training, and supervision of senior employees charged with protecting the health and safety of subordinates, subject to regulatory exclusions.
• An employee claims psychological injury and non-economic damages resulting from the employer's timing for a return to the workplace during COVID-19 or supervisors permitting too many employees working together in close quarters at the office (absent social distancing guidelines). Some EPLI policies can cover such claims alleging mental anguish or emotional distress notwithstanding the "bodily injury" exclusion.
• An employer forced to terminate a significant number of employees because of the COVID-19 economic downturn receives a Worker Adjustment and Retraining Notification ("WARN") Act claim for unpaid wages and compensation. Most EPLI policies contain WARN Act and "wage-and-hour" claim exclusions, though retaliation claims may be carved out for coverage.
• An employer forced to terminate or furlough a significant number of workers is alleged to have discriminated against a protected class, such as older workers, in connection with that job action. Many EPLI policies respond to certain class action discrimination claims, but some insurers require the employer to satisfy a higher self-insured retention or deductible relative to an EPL claim by a single employee before affording coverage.
• An employee claims the employer failed to provide paid leave as required by the Families First Coronavirus Response Act. While it remains unclear at this stage how EPLI will respond to COVID-19-related leave claims, most EPLI policies exclude coverage for regulatory violations arising from the failure to pay wages or improper salary deductions. However, retaliation claims with respect to an employee's rights under the Family and Medical Leave Act often trigger coverage.

Being Proactive

Again, whether coverage is available under an employer's EPLI policy for COVID-19-related EPL claims depends on the policy form's specific provisions and the facts surrounding the EPL claim. Employers should review their EPLI policies to evaluate coverage for COVID-19-related claims and consider whether their insurance policy language can be improved to expand the scope of coverage before each year's renewal. Further, employers should be mindful of EPL claim reporting requirements to avoid technical notice defenses raised by the EPL insurer.