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EPL Insurance: Third-Party Liability Coverage

As seen in recent high-profile third-party discrimination and sexual harassment cases, the potential for third-party liability can be substantial and should not be ignored. Sensing a potentially important coverage feature that either is not addressed, or is specifically excluded under many EPL insurance policies, some insurers now offer third-party liability coverage as part of or as an amendment to their standard EPL insurance policy. The following is an example of an insurance policy clause granting third-party liability coverage:

With respect to any customer(s), client(s), or any other individual or group of individuals, other than an Employee or applicant for employment with the Company or an Outside Entity, Employment Practices Violation shall mean only any actual or alleged discrimination, sexual harassment or violation of an individual’s civil rights relating to such discrimination or sexual harassment, whether direct, indirect, intentional or unintentional.
NATIONAL UNION 67976 [6/97]

When evaluating such grants of coverage, pay particular attention to who is considered a third-party claimant. In the above example, a third-party claimant is described broadly to include non-employees who bring a claim or allege some specified wrongful practice or act. Some EPL insurance policies may limit who a third-party claimant can be by defining a third-party claimant only as a customer, client or other specified claimant. Such a definition would limit the effectiveness of the coverage grant and should be avoided.

Because third-party coverage is new, there is little precedence in how insurers will actually respond in handling such claims. Where third-party coverage is desired or provided, it is best to confirm with the insurer any limitations that third-party coverage is subject to beyond who may be a claimant.

Which EPL Insurers Are Offering Third-Party Liability Coverage?

The following insurers offer third-party liability coverage in their EPL policies, either as an endorsement or contained within the basic policy form.

Note: If you are an insurer offering third-party EPL coverage, let us know.
We will alert subscribers in future issues of The Risk Management Letter.

riskVue | The webzine for risk management profesionals
July 1999

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