Why Claims-Made Coverage Matters for EPLI
What Does Claims-Made Coverage Mean?
A claims-made EPLI policy generally focuses on when a claim is first made against the insured and when that claim is reported to the insurance company.
When the Claim Is Made
Depending on the policy definition, a claim may include a lawsuit, written demand, administrative charge, or another qualifying allegation made against the employer.
When the Claim Is Reported
The employer may also be required to notify the insurer within the reporting period specified by the policy. Waiting too long can create coverage issues.
When the Alleged Act Occurred
The employment practice that led to the claim may also need to occur on or after the applicable retroactive date, subject to the policy terms.
Why Does the Retroactive Date Matter?
The retroactive date can establish how far back qualifying employment practices may be considered under a claims-made EPLI policy.
A claim may be made today about an employment decision that happened months or even years earlier. Whether that earlier event falls within the policy can depend on the retroactive date and prior-acts provisions.
Retroactive Date
This date may identify the earliest qualifying employment act that can be considered under the current policy.
Prior Acts Coverage
Prior-acts protection may allow the policy to address qualifying allegations involving earlier employment decisions, subject to the retroactive date and other provisions.
Known Circumstances
Existing complaints, disputes, demands, or circumstances that could reasonably lead to a claim may be subject to application questions or exclusions when new coverage is purchased.
Changing Insurance Companies
When moving EPLI coverage to another insurer, the prior retroactive date and continuity provisions should be reviewed carefully.
Why Can a Gap in EPLI Coverage Matter?
Claims-made coverage is highly dependent on timing. Allowing a policy to lapse or replacing it without reviewing continuity can create a period in which an employment claim does not fit neatly into either the old or new policy.
Avoid Gaps
Renew EPLI on time and coordinate replacement coverage carefully so there is no unintended break between policies.
Preserve the Retroactive Date
When changing carriers, verify whether the new policy maintains the existing retroactive date or provides appropriate prior-acts protection.
Report Potential Claims Promptly
Employee complaints, attorney letters, administrative charges, demands, and other circumstances should be reviewed promptly to determine whether notice to the insurer is required.
Extended Reporting Period
When claims-made coverage ends, an Extended Reporting Period may sometimes be available for certain claims arising from qualifying prior acts, subject to policy terms.
Changing EPLI carriers should involve more than comparing price and limits.
Review the retroactive date, prior acts, known circumstances, reporting requirements, and continuity of coverage before replacing an existing policy.
