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Employment practices liability insurance: Managing the return to the office

As the pandemic continues to impact the world of work, many employers are turning to employment practices liability insurance (EPLI) as a way of mitigating their risk from COVID-19.

03/11/2021 · 5 minute read

As the pandemic continues to negatively impact the world of work, many employers are increasingly turning to employment practices liability insurance (EPLI) as a way of controlling and mitigating their risk from COVID-19.

COVID-19 work-related risks

Employers are still adapting to life post-lockdown, as they continue to grapple with the way in which work-related risks have changed since the start of the pandemic. These risks continue to evolve, especially as workers return to their offices after prolonged absences, and may arise from a number of factors, including employers:

  • Making inadequate assessments of COVID-19 risks.
  • Taking inadequate steps to reduce COVID-19-related health and safety risks for their workforce.
  • Failing to properly address employee concerns about returning to the office.
  • Failing to correctly administer furlough schemes.

In these circumstances, many insured clients are turning to EPLI.

What does EPLI protect against?

EPLI protects organisations and their staff, in the event of claims such as unfair and wrongful dismissal and discrimination. The product has also evolved, in certain instances, to include cover for third-party exposures, such as risks to third parties arising from discrimination and harassment by insureds.

EPLI and the pandemic

The basis of EPLI is the employment relationship. Just as employers have struggled with new and emerging risks arising from COVID-19, insurers have had to evaluate pandemic-related risks and find acceptable ways of addressing those risks as part of the underwriting process.

So how exactly have insurers sought to address these risks? At the outset, many insurers sought to impose COVID-19 exclusions and “reduction in force” endorsements, as a way of controlling risk.

Eighteen months on, while our knowledge of COVID-19 has increased considerably, insurer concerns about risks stemming from the pandemic remain. In seeking to address those concerns insurers have taken two distinct paths.

  • A significant number of insurers have simply “backed away” from underwriting EPLI altogether, leading to real difficulties for some insureds in securing cover.
  • For those insurers still writing this business, they appear to have reverted to a more traditional approach of individual risk assessment. By way of example, many insureds wishing to purchase EPLI are expected to complete a specific COVID-19 questionnaire ahead of renewal, so that insurers can evaluate how they have coped with the pandemic.

Claims expected to rise

At the beginning of the pandemic, there was a real concern that it would lead to a sharp rise in claims, both for EPLI, and generally. While there has undoubtedly been an uptick in claims, in the past six months, only a fifth of EPLI notifications by our insurer clients have been COVID-19 related; the dramatic increase that we expected has not yet materialised. Despite this, the risk of a significant rise in COVID-19-related claims remains a key area of focus for insurers. This is unsurprising given that many of the societal factors that have caused insurers concern remain.  

In the UK, employment tribunals were closed for a large part of 2020, resulting in a significant backlog of cases. In addition, the furlough scheme, which supported many businesses and their employees, ceased at the end of September 2021. Many commentators, in the media and elsewhere, are concerned that unemployment will increase significantly as result, leading to a corresponding increase in employment-related litigation and, potentially, EPLI claims. As a result, demand for EPLI remains high at a time when it can be difficult to purchase.

So what can you do to secure EPLI?

As we have observed, some insurers are increasingly unwilling to write this class of business, particularly while the position remains so uncertain. Meanwhile, others are now taking a deeper look at individual risk profiles to differentiate clients. So how will insureds meet this challenge? For clients who purchase other financial lines products, such as directors and officers liability insurance, they may be able to leverage existing relationships with their insurers to secure EPLI. Alternatively, a number of our clients have also turned to the Bermudian market to secure their EPLI.

Finally, there are a number of steps you can take, whether seeking renewal of an EPLI policy, or seeking to secure cover for the first time. These include:

  • Contacting a broker to help present your business in the most appropriate light to underwriters.
  • Formulating an early renewal strategy.
  • Practicing pro-active risk management and remaining aware of emerging risks.
  • Keeping a record of how you have managed both pandemic and return-to-office exposures, so these can be highlighted at renewal or at the time of purchasing cover.

In the event that you wish to purchase EPLI, approaching your broker early should assist in securing an optimal outcome.

If you have questions regarding employment-related insurance, please contact your Marsh advisor.

Karen Cargill

  • United Kingdom

Jessica Luff

  • United Kingdom

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