Employers covered under an employment practices liability insurance policy need to recognize that late reporting of claims alleging discrimination or an adverse employment action could jeopardize, or even negate, coverage under the policy. 

Common reasons for late reporting include haphazard protocols for alerting the appropriate manager that an EPLI-related grievance has been made, Laura Zaroski, vice president of management, professional and cyber liability at Socius Insurance Services Inc., told Bloomberg BNA in early March at a New York conference focusing on the EPLI market, coverage and claims.

“Many times a written complaint or administrative charge will not makes its way to the correct manager or supervisor, and therefore, is not timely tendered to the company’s EPLI carrier,” the Chicago-based broker said.

Bloomberg BNA: Is timely notification something more employers need to understand?

Zaroski: Absolutely. We talk about this issue at every conference. A company receives a demand letter or notice, but that document bounces around the office and never makes its way to the carrier. Making sure that a clear chain of command is in place for employee grievances, written demands or actual claims is very important.

Many times lower-level employees or managers may receive a charge from the Equal Employment Opportunity Commission that has been filed against the company, but they don’t realize that a response is required or that the charge constitutes a “claim” under the company’s EPLI policy.  

The letter or charge sits on the person’s desk for a month or two, until eventually, the person realizes that it should probably be forwarded to the human resources department for handling.  By then it could be too late. 

It is a common mistake an insured company makes to assume that a demand letter or charge filed with the EEOC or the Labor Department is not a “claim” that should be tendered under their EPLI policy.  

Often times, these demands and charges ripen into a civil lawsuit, and at that time, the lawsuit is tender to the carrier. If the policy expired and notice was not timely given, then the insured company will find that coverage for the lawsuit will be declined based upon late notice.   

Most EPLI policies have broad definitions of what constitutes a “claim.” Carefully review your policy to make sure you understand what types of complaints can and should be tendered to your carrier.

When in doubt, I also recommend that my clients tender an incident to their EPLI carrier. At the very least, most policies have a notice of potential claim provisions (sometimes called notice-of-circumstances provisions) under which the carrier will take notice of an incident that might give rise to a claim, but that has not ripened  into a claim yet.   

Notice of a potential claim is a great way to preserve your rights under the policy in case a claim is made later based upon a situation that you felt was sure to lead to a heated dispute.

The bottom line is that it benefits everyone to get the documentation in early to your carrier.  Your carrier will likely be able to provide guidance on the best way to mitigate and handle your claim. Timely notification allows the defense counsel that your carrier will appoint to assist the company in investigating the allegations and outlining a strategy for the defense.  

Another reason you want your carrier involved at the earliest juncture is that expenses incurred after notice and with the carrier’s approval will count towards the exhaustion of the company’s retention. 

Basically, the meter doesn’t start ticking until you tender the matter to your carrier. Carriers will accept notices of potential claims, so let them make the call whether it’s a real or potential claim.

Bloomberg BNA: Is there a standard cut-off period for filing a claim with an EPLI insurer?

Zaroski: Insureds can report claims any time during the policy period as well as during the reporting period which extends usually 30, 60 or 90 days after the policy has expired.  Each policy is different, so you need to examine the reporting provision to make sure you know how long you have once the policy has ended, to report a claim that arose from events that occurred within the policy period.

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