Author: Marc Zettl

With the global economy facing potential upheavals from COVID-19, some companies could be forced to lay off employees. These actions will likely trigger employment practices liability insurance (EPLI) claims, especially knowing the commonality of these cases already.

Former employees might quickly jump to conclusions, such as wrongful termination or discrimination, resulting in EPLI litigation. Defending against allegations of this nature could be incredibly costly—even if there’s no legitimate cause found. An EPLI policy would work to cover defense costs and help your company navigate the jittery economy. 

In order to put your business in the best possible position ahead of a decision about a Employment Practices Liability claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of WC coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.

One of the largest areas of exposure for public companies (and to some extent, private companies) is securities class actions and/or shareholder derivative claims relating to affirmative acts of mismanagement and/or failure to act/disclose by officers and directors in response to the COVID-19 outbreak.

Another major area of concern relates to liability arising from cyber security and privacy issues, given that many company employees are now working remotely to avoid exposure to COVID-19. The failure to sufficiently protect a company’s network could leave the company vulnerable to cyberattacks, ransom demands, loss of company data, and overall exposure for failing to insure against cyber risks.

Coverage under a D&O policy for the above exposures will vary according to the individual terms and conditions of the policy. Nevertheless, securities class actions and shareholder derivative claims are claims that typically fall within the scope of the insuring agreement under a D&O policy. In assessing the potential for coverage, careful review of several exclusions and other issues is necessary. For example, the language of any bodily injury exclusion should be reviewed for its breadth (e.g., claims “arising from” bodily injury vs. claims “for” bodily injury) as well as any exceptions to that exclusion, such as securities actions.

As is often the case with D&O claims, the language of the conduct exclusion (i.e., dishonest, fraudulent, malicious, and criminal acts) should be reviewed to determine whether its application requires a final adjudication exhausted by appeal or only “in fact” confirmation of such conduct. Moreover, claims also may implicate the professional services exclusion to the extent an employee’s professional services to the company gave rise to the claim, such as legal advice from an in-house counsel, forensic accounting services by the Chief Financial Officer, or otherwise.

As to cyber security and privacy, direct losses caused by a cyber event may need separate cyber insurance. To the extent the cyber event triggers a securities class action, however, there are a number of exclusions (including those discussed above) that may require consideration. For example, the exclusion for war or terrorism should be considered in the event of a cyberattack because there are instances in which cyberattacks are orchestrated by state actors or quasi-state actions and/or terrorist organization criminal enterprises – as opposed to random, “lone wolf” actors.

In order to put your business in the best possible position ahead of a decision about a Directors & Officers Liability claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of WC coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.

At the precipice of the issue for employers and business owners is the liability they may be required to shoulder if essential workers contract the virus on the job, spread it to others or bring it home to their families. Could the business be liable for a workers’ compensation (WC) claim?

The answer is: it depends. The clarification of insurance coverage remains largely undecided as it relates to Workers Compensation. Right now, the answer is almost exclusively at the carrier’s discretion. Application of coverage eventually “may” be decided by state and federal courts, or government intervention.

Workers Compensation coverage is subject to each state’s jurisdiction. Currently, a few states – Kentucky, Washington State, Michigan and Colorado have officially ruled on WC and COVID-19. These states will provide Workers Compensation benefits or wage replacement to healthcare workers and first responders during the time they are quarantined after being exposed to the virus on the job. Washington State Workers Compensation coverage will pay for medical testing, treatment expenses and provide indemnity payments for those who cannot work, while the Kentucky Employers Mutual Insurance Co., said they will pay wage-replacement benefits for first responders or healthcare employees while in quarantine.

For non-healthcare workers and general employees in every other state, Workers Compensation coverage remains a moving target and compensability will be based on the work of each individual class, and ultimately determined by the carrier and individual state. It has to be in the course and scope of employment.

In order to put your business in the best possible position ahead of a decision about a Workers Compensation claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of WC coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.