Will EPLI Insurance Respond To Covid-19 Employment Claims?

In addition to raising anxiety, the Coronavirus is also raising some unique workplace challenges and interesting legal questions in the context of employment liability. Can companies require their employees to travel to affected areas for work? Is a virus contracted at work considered a workplace injury? Can companies terminate employees that refuse to come to work or insist on working from home? With all of these questions however, there is one certainty; Covid-19 will give rise to employment litigation, which may or may not be covered under your current management liability insurance program. So how might employment practice liability insurance policies respond to these emerging claims?

Safe Workplace and OSHA Violation Claims (Coverage for Retaliation Only)

Almost all EPLI policies contain a specific exclusion for any actual or alleged violations of OSHA – excluding both defense costs and any resulting loss or settlement. But what if an employee refuses to come to work, or insists they must work from home citing an unsafe workplace with imminent danger? If that employer terminates that employee, would an EPLI policy provide coverage for a resulting wrongful termination claim against their employer? The answer is, likely. Most EPLI policies provide a “retaliation” carveback to the OSHA exclusion which specifically carves back claims that may allege retaliation (such as wrongful termination) in connection with an employee exercising their rights under OSHA. Policyholders should nonetheless review their coverage to ensure that their policies do in fact include a retaliation carveback to those exclusions. Whether or not the employee has a valid OSHA claim is a separate discussion entirely, and a question that appears to have no clear answer at the moment, but it’s safe to say the more hazardous the working environment, such as requiring travel to a highly infected area, or requiring healthcare workers to work with inadequate protection, the more likely it is that an employer will encounter such a claim.

Wage & Hour Claims and FLSA Violations (Coverage Under Certain Policies)

With employees being asked to self quarantine, stagger hours, or work from home, it’s important for directors and officers to remember that these turbulent times may give rise to Fair Labor Standard Act “FLSA” violations. In addition to the fact that there may be considerable uncertainty surrounding compensation during these unique work arrangements, telecommuting can also create challenges in accurately tracking hours worked. EPLI policies vary greatly on the scope of coverage provided for “wage and hour claims”. As discussed in our recent Wage and Hour article, policy terms and conditions can range from no coverage at all, to heavily sub-limited coverage for defense costs only, to full coverage for defense costs and resulting settlements. In order to address many of the questions employers may have, the Department Of Labor has recently issued some FLSA guidance (here).

FMLA Violations (Coverage for Retaliation Only)

Per the Department Of Labor, An employee who is sick or whose family members are sick may be entitled to leave under the FMLA under certain circumstances. The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month leave year for specified family and medical reasons. This may include the flu where complications arise that create a “serious health condition” as defined by the FMLA”. It’s important to note, while federal law does not mandate paid sick leave under these circumstances, employment contracts and/or state and local laws (such as New York) may. When discussing FMLA violations in the context of insurance, the same coverage determination we discussed with respect to OSHA violations (above) holds true here. Employment practice liability insurance policies specifically exclude claims alleging FMLA violations – precluding coverage for both defense costs and loss/settlements in connection with an FMLA claim. Most insurers will however include a careveback for “retaliation” should an employee believe they were retaliated against for exercising their rights under the law.

Mass Layoffs & WARN Act Violations (No Coverage)

In an effort to mitigate some of the financial damage from lost revenues and forced closures, many companies may resort to temporary (or permanent) reductions in workforce and/or facility closures. When doing so, the c-suite needs to ensure the company acts in compliance with the WARN act and any similar state laws. While state laws may differ slightly, the WARN act requires companies with 100 employees or more, to provide 60 days advanced notice to employees affected by mass layoffs (those affecting 50 persons or greater). Failure to provide the required notice can result in WARN act violations which are specifically excluded by EPL insurance policies. A recently released FAQ by Akin Gump however raises an important point, “60 days’ notice is not required if the shutdown is a result of a “natural disaster” or “unforeseeable business circumstances.” Although the WARN Act does not specifically address whether a pandemic or potential pandemic qualifies as a natural disaster or unforeseeable business circumstance, the key factor for both is that the event was sudden, dramatic and not foreseeable within the required notice period. Employers should note that, even if these exceptions apply to the COVID-19 outbreak, the employer is still required to give as much advance notice as is practicable”

Bodily Injury / Workers Compensation Claims (Undetermined)

All EPLI insurance policies contain broad bodily injury exclusions, which is understandable since claims alleging workplace injuries belong insured under an appropriate workers compensation policy. But would workplace-acquired coronavirus give rise to a covered workers compensation claim? Unfortunately since we are in uncharted waters at the moment, there appears to be no clear answer. It’s probably safe to assume that hazardous workplaces such as hospitals are more likely to encounter these claims, and it’s also more likely that such claims would qualify for coverage under workers compensation insurance. Some states such as Washington are in fact taking specific steps to ensure such claims are covered, with other states likely to follow.

Get (Risk) Managed.

Ready to review your existing insurance program? Interested in setting a reminder for a renewal review? Or simply have a question? We're here to help. We also understand you're busy - let's schedule a time to speak that works best for you. Simply schedule a call and we'll reach out when it's convenient.

Schedule a callback