While employers incur more exposure daily with the increasing complexity of employment laws and social sentiment, the 2023 market for Employment Practices Liability Insurance (EPLI) progresses favorably for well-run organizations with thorough human resource management.
To protect your rates and insurability, implement a proactive risk management plan to mitigate losses, litigation exposure and employment risks. A third-party HR service, your insurance broker and your insurance carrier are key partners to help navigate challenges and prevent frequent and severe EPLI claims.
Market Outlook for 2023
In December 2022, Alera Group released its 2023 Property and Casualty Market Outlook. Here’s what we said about Employment Practices Liability Insurance:
“The market has gained conﬁdence in Employment Practices Liability Insurance (EPLI) as recent rate increases and coverage restrictions foretell favorable underwriting results.
- “Pricing is trending favorably into 2023, with relatively modest increases averaging 7%. Well-performing risks not in high-hazard classes can expect to see rate increases of ﬂat to single-digit, primarily reﬂecting inﬂation-driven costs. Others with poorer loss history and/or in higher-risk classes will see a combination of higher rates and retentions.
- “Availability and capacity remain stable and are broadly available in both the standard and wholesale markets. However, the standard markets’ preference for relatively low limits (up to $500,000) leaves the demand for higher limits largely to the surplus lines market, where higher rates and retentions will apply.
- “Underwriting scrutiny will remain stable as markets have become more accepting of heightened standards introduced in prior years. Classes that will be more difficult to place include those where staffing is transitory and turnover is high — such as healthcare, hospitals, hospitality, schools and retail — and any having a poor loss history.
- “All applicants will be subject to a thorough claims history analysis and will be expected to complete applications for both new and renewal accounts, and to produce evidence of a functioning, formal risk management program.”
EEOC Discrimination Charges Spike
Despite the positive insurance market trends, the EEOC (U.S. Equal Employment Opportunity Commission) Annual Performance Report for Fiscal Year 2022 reported a 20% spike in discrimination charges and an increase in monetary benefits totaling $513 million. Communication with the agency amplified, with 18% more phone calls and 34% more emails than in FY 2021.
Pandemic-related exposures and social challenges have raised public awareness on employee rights and employer responsibilities. It’s worth noting that a single phone call from an employee to the EEOC can lead to a company-wide investigation for systemic employment discrimination.
In March 2023, to cite one recent example, a federal court awarded the EEOC more than $2.6M for a sex discrimination case. The business refused to hire 48 women for certain positions and changed their work duties based on sex, which revealed a pattern of discrimination.
Expect Accommodation Requests
The Department of Labor Bureau of Labor Statistics reported that 42% of establishments with 100-5,000 employees offered at least one form of workplace flexibility during the pandemic, a figure that jumped to 51% for establishments with 5,000 or more employees.
As businesses move towards a return to the office, they can expect an influx of accommodation requests from employees who have enjoyed the flexibility offered during the pandemic.
Laura Lapidus, employment practices liability and management liability expert at CNA Insurance, told the online publication Risk & Insurance, “I think you’re going to see an increase in requests for accommodation from people who have disabilities, whether it’s long-COVID or whether it’s some type of disability where they’re concerned about getting COVID.
“It’s a lot harder for an employer to [insist] that a job can’t be performed remotely when the employee has been doing it remotely for two years,” she added.
New Laws and Evolving Landscape
The Pregnant Workers Fairness Act (PWFA) goes into effect on June 27, 2023, and mandates that private and public sector employers with more than 15 employees provide reasonable accommodations for pregnant employees. The EEOC summarizes reasonable accommodations and prohibited actions under the new act in the article “What You Should Know About the Pregnant Workers Fairness Act.”
This new act follows the expansion of the Providing Urgent Maternal Protections for Nursing Mothers Act earlier this year to further afford employees time and accommodations to express breast milk at work.
In an analysis piece for the labor and employment law website Littler, “Ones to Watch: Legislation Landscape for 2023,” attorneys Maureen Lavery and Hannah Stilley report that 2023 hot topics include:
- Workplace freedom of speech;
- Reproductive health;
- Use of artificial intelligence in personnel decisions;
- Pay transparency;
- Family status and family caregiving discrimination;
- Sexual orientation and gender identity discrimination;
- Prohibitions against antisemitism;
- Marijuana legalization;
- COVID-19 and non-COVID-19 vaccination mandates in the workplace.
So how can you best manage employment law at the federal, state and local levels?
Partner with an HR expert.
EPL Risk Management Best Practice: Invest in an HR Service
The increasing complexity and evolution of employment law makes it difficult for employers to fulfill compliance obligations. Professional HR service companies help organizations avoid unintentional violations and improve overall human resource management. Specialists in this niche area can provide an entire toolbox of resources for employee handbooks, annual reviews and more that reflect new and changing local, state and federal employment laws, such as the Pregnant Workers Fairness Act (PWFA). HR service companies can also review established HR materials and recommend amendments to comply with state and federal laws.
The role of an HR service is to help educate managers and employees. HR services will create effective hiring and screening programs to avoid discrimination, advise employees on how to respond to sexual harassment or discrimination and help document the employer’s actions to remedy disputes. For newer initiatives such as diversity, equity and inclusion, an outside view on the organization’s internal HR is critical.
Your Insurance Broker and Carrier Partners
A knowledgeable, experienced broker with employment practices liability expertise can guide you through the process for new coverage or renewal terms. A broker represents your interests to insurance carriers with the goal of maximizing placement for the best coverage forms, policy limits and pricing. Full-service brokers offer a wealth of risk management resources, including HR services to navigate employee rights and employer responsibilities.
And if your loss history contains EPL claims in the past five years, a diligent broker can help you present your business to underwriters more favorably by illustrating remediation steps that eliminate the exposures found in prior claims.
Insurance carriers may also offer risk management services to prevent allegations of discrimination, including online loss-control resources. Several carriers include a toll-free helpline that policyholders can call for immediate answers to EPL inquiries.
Chubb’s “Employment Practices Loss Prevention Guidelines” offers a comprehensive overview of the federal laws governing the employment relationship and practical suggestions for limiting employment liability.
Ultimately, it’s the employer’s job to make sure their house is in order. The volatility in today’s workforce lends itself naturally to an uptick in EPL claims. Invest in an HR service, and work with your insurance partners to mitigate risk and strengthen human resource management.
For a broader look at navigating insurance market conditions, read Alera Group’s 2023 Property and Casualty Market Outlook. Learn about factors driving the current P&C market, as well as an analysis by industry and lines of coverage. To obtain the report, click on the link below.
About the Author
Alan Goodrich, CPCU, AAI
Commercial Insurance Consultant
HMK Insurance, an Alera Group Company
A commercial insurance professional since 1985, Alan Goodrich continues to serve clients by utilizing his extensive risk management experience and knowledge. Over the years, he has developed a significant emphasis on the manufacturing industry, including plastics, metal workers, electronics and foods. Other industries he serves include wholesalers, veterinarians and medical/dental organizations. Alan has earned the insurance industry designations of Chartered Property Casualty Underwriter (CPCU) and Accredited Advisor in Insurance (AAI).
- Connect with Alan on LinkedIn