What Are Common Exclusions On an EPL Insurance Policy?

Claims that should be covered by other insurance
These are the particularly important in EPLI because of the policy’s “inclusion by exclusion” philosophy.

• Bodily injury/property damage (BI/PD): should be covered by GL, property, workers comp, employers liability.
• Products liability: should be covered by GL or a dedicated products liability policy
• Securities violations: should be covered by a D&O policy
• Pollution: should be covered by a pollution liability or environmental impairment liability policy
• Professional services: should be covered by an E&O policy
• Employee benefits and ERISA violations: should be covered by a fiduciary liability policy
• Violation of privacy laws: when not covered as a personal injury, this should be covered by a cyber policy.
 
Conduct / Fraud / Deliberate acts
Any deliberate criminal, dishonest or fraudulent act should not be covered by insurance and the policies make that clear. Of course the carrier would have to prove that the act was deliberate if they denied a claim and the insured took them to court. But, if they did prove that the conduct exclusions were triggered, the carrier would want every dollar back that they paid to defend the bad actor. We advocate for language that states that this exclusion isn’t actually triggered until it’s irrefutable that the policy really shouldn’t have been defending them in the first place.
 
Bodily injury
This exclusion prevents the policy from being used like a workers comp, disability, or general liability policy. Strong policies note that claims “for” bodily injury aren’t covered but those “arising out of” bodily injury should be. We also push for carvebacks to this exclusion for claims alleging mental anguish, emotional distress and humiliation.
 
Breach of contract
This isn’t a GL or E&O policy so the underwriter doesn’t want to assume too much contractual liability. There is the standard (and confusing) caveat that goes “provided, however, this exclusion does not apply to liability the Insured would have in the absence of such contract.” (i.e. if you have a contract that says “I will not discriminate against you, my employee” and you discriminate against the employee, the carrier won’t deny the claim simply because it was a part of a contract).

This becomes more important when Wage and Hour coverage is added and when independent contractors are brought into the conversation. In both cases, there is real employment-related contractual liability and, as such, we ask the underwriter to open up this exclusion whenever the Wage and Hour coverage enhancement is included.
 
Regulatory
There are several federal laws that EPLI isn’t designed to cover. Some of the laws here are included for the same reason the “claims that should be covered by other policies” exclusions are added (e.g. the Employee Retirement Income Security Act exclusion, a dispute which should instead be addressed by fiduciary liability insurance).
Others are focused on employment matters. One important example is the WARN Act exclusion. Federal law stipulates certain things you can and can’t do during layoffs or workforce reductions. If you break these rules, you have to pay the price. Insurance companies won’t defend you.
 
Wages, overtime, etc.
See “Wage and Hour” coverage enhancement below.

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11/25/2024