Page 28 - BusinessWest May 26, 2020
P. 28

Policy Decisions
In the COVID World, Businesses Should Examine Insurance Expenses
By Timothy M. Netkovick, Esq.
The COVID-19 pandemic has caused many businesses to examine their bal- ance sheets. One of the areas that could
be looked at is how much benefit a business
is getting from its current insurance portfolio, and whether downsizing coverage could be an option.
In today’s world, a common feature of a busi- ness-insurance portfolio is employment-prac- tices liability insurance (EPLI), which is different than traditional liability insurance and provides coverage for discrimination, wrongful termina- tion, and other workplace issues.
EPLI typically covers discrimination claims based upon sex, race, national origin, age, and all other characteristics prohibited by law. This includes claims made under the Americans with Disabilities Act, the Family Medical Leave Act, associated state discrimination statutes, and other federal laws. EPLI policies usually provide coverage to the company, management, supervi- sors, and employees from claims that arise under the policy. EPLI typically does not cover wage- and-hour law violations, unemployment issues, ERISA, or COBRA matters.
Perhaps your business has been fortunate enough to avoid employment litigation over the past few years. Therefore, the cost/benefit
analysis to your business will be different than a business that has been tied up in employment litigation in the recent past. The first obvious cost is the cost of purchasing the policy. Higher insur- ance coverage
if it is faced with a high retention and a small amount of discrimination claims that are usu- ally resolved at the administrative level. Has your business had EPLI for several years and never
 costs more than
a policy with
a lower-policy
limit. In addi-
tion to the cost
of purchasing
the policy, busi-
nesses will also
need to factor in
the cost of the
‘retention’ it is
required to pay in the event of a claim.
“COVID has prompted myriad adjustments in the business world. EPLI is one of the expenses a company will want to examine to see if it is getting the most bang for its buck.
    Retention is similar to a deductible in
other insurance policies, and is the amount of expenses for which the business is responsible before the insurer will begin paying for the cost of defense. Insurers use retention as a way to avoid incurring the expense of defending against nominal or frivolous claims by passing on that expense to the business. Conversely, the business will also want to evaluate the amount of their retention prior to obtaining EPLI.
A business will need to evaluate its options
”
exhausted its retention? Or does your business have a high volume of discrimination cases at the administrative level and also never exhausted its retention?
Another factor to consider in evaluating
the cost of EPLI is your company’s approach
to employment lawsuits. Businesses will need to have a consistent strategy when it comes to employment lawsuits. Is your company going to vigorously defend
against all claims? If
so, that may impact
 EPLI
Continued on page 52
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