Employee Lawsuit Coverage

Most physicians have a feeling that they carry too much insurance and that most of their policies are too expensive.

The policies you should have and how much they should cost will be covered in next month's column, but no matter what is in your insurance portfolio now, there is one relatively inexpensive policy—one you probably have never heard of—that you should definitely consider adding.

Recently, I corresponded with a dermatologist in California who experienced every employer's nightmare: He fired an incompetent employee, who promptly sued him for wrongful termination and accused him of sexual harassment to boot.

The charges were completely false, he told me, and the employee's transgressions were well documented, but defending the lawsuit would have been expensive, so his lawyer advised him to settle it for a significant sum of money.

Disasters like this are becoming more common. Plaintiffs' attorneys know all too well that most small businesses, including medical practices, are not protected against such legal actions and usually cannot afford to defend them in court.

Fortunately, there is a relatively inexpensive way to protect yourself: Employee practices liability insurance (EPLI) provides protection against many kinds of employee lawsuits that are not covered by conventional liability insurance. These include wrongful termination, sexual harassment, discrimination, breach of employment contract, negligent hiring or evaluation, failure to promote, wrongful discipline, mismanagement of benefits, and the ever-popular emotional distress.

EPLI would have defended the California dermatologist, had he carried it, against his employee's charges. In fact, there is a better than even chance that the plaintiff's attorney would have dropped the lawsuit entirely once informed that it would be aggressively defended.

As with all insurance, you should shop around for the best price and carefully read the policies on your short list.

All EPLI policies cover claims against your practice and its owners and employees, but some policies cover only claims against full-time employees.

Try to obtain the broadest coverage possible so that part-time, temporary, and seasonal employees, and, if possible, even applicants for employment and former employees also are covered.

You also should look for the most comprehensive policy in terms of coverage. Almost every EPLI policy covers the allegations mentioned above, but some offer a more comprehensive list of covered acts, such as invasion of privacy and defamation of character.

Also be aware of precisely what each policy does not cover. Most contain exclusions for punitive damages and court-imposed fines, as well as for criminal acts, fraud, and other clearly illegal conduct. For example, if it can be proved that you fired an employee because he or she refused to falsify insurance claims, any resulting civil suit against you will not be covered by EPLI, or any other type of insurance.

Depending on where you practice, it may be necessary to ask an employment lawyer to evaluate your individual EPLI needs.

An underwriter cannot anticipate every eventuality for you, particularly if he or she does not live in your area and is not familiar with employment conditions in your community.

Try to get a clause added that permits you to choose your own defense lawyer. Better still, pick a specific lawyer or firm that you trust and have that counsel named in an endorsement to the policy. Otherwise, the insurance carrier could select a lawyer who may not consider your interests to be a higher priority than those of the insurance company itself.

If you must accept the insurer's choice of counsel, you should find out whether that lawyer is experienced in employment law, which is a very specialized area. And just as with your malpractice policy, you will want to maintain as much control as possible over the settlement of claims. Ideally, no claim should be settled without your expressed permission.

As with any insurance policy you buy, be sure to choose an established carrier with ample EPLI experience and solid financial strength.

A low premium is no bargain if the carrier is new to EPLI, or goes belly up, or decides to cease covering employee practices liability. (As always, I have no financial interest in any company or product I discuss in this column.)

Above all, make sure that you can live with the claims definition and exclusions in the policy you choose and seek advice before you sign on the dotted line if you are unsure what your specific coverage needs are.

To respond to this column, e-mail Dr. Eastern at [email protected]

Most physicians have a feeling that they carry too much insurance and that most of their policies are too expensive.

The policies you should have and how much they should cost will be covered in next month's column, but no matter what is in your insurance portfolio now, there is one relatively inexpensive policy—one you probably have never heard of—that you should definitely consider adding.

Recently, I corresponded with a dermatologist in California who experienced every employer's nightmare: He fired an incompetent employee, who promptly sued him for wrongful termination and accused him of sexual harassment to boot.

The charges were completely false, he told me, and the employee's transgressions were well documented, but defending the lawsuit would have been expensive, so his lawyer advised him to settle it for a significant sum of money.

Disasters like this are becoming more common. Plaintiffs' attorneys know all too well that most small businesses, including medical practices, are not protected against such legal actions and usually cannot afford to defend them in court.

Fortunately, there is a relatively inexpensive way to protect yourself: Employee practices liability insurance (EPLI) provides protection against many kinds of employee lawsuits that are not covered by conventional liability insurance. These include wrongful termination, sexual harassment, discrimination, breach of employment contract, negligent hiring or evaluation, failure to promote, wrongful discipline, mismanagement of benefits, and the ever-popular emotional distress.

EPLI would have defended the California dermatologist, had he carried it, against his employee's charges. In fact, there is a better than even chance that the plaintiff's attorney would have dropped the lawsuit entirely once informed that it would be aggressively defended.

As with all insurance, you should shop around for the best price and carefully read the policies on your short list.

All EPLI policies cover claims against your practice and its owners and employees, but some policies cover only claims against full-time employees.

Try to obtain the broadest coverage possible so that part-time, temporary, and seasonal employees, and, if possible, even applicants for employment and former employees also are covered.

You also should look for the most comprehensive policy in terms of coverage. Almost every EPLI policy covers the allegations mentioned above, but some offer a more comprehensive list of covered acts, such as invasion of privacy and defamation of character.

Also be aware of precisely what each policy does not cover. Most contain exclusions for punitive damages and court-imposed fines, as well as for criminal acts, fraud, and other clearly illegal conduct. For example, if it can be proved that you fired an employee because he or she refused to falsify insurance claims, any resulting civil suit against you will not be covered by EPLI, or any other type of insurance.

Depending on where you practice, it may be necessary to ask an employment lawyer to evaluate your individual EPLI needs.

An underwriter cannot anticipate every eventuality for you, particularly if he or she does not live in your area and is not familiar with employment conditions in your community.

Try to get a clause added that permits you to choose your own defense lawyer. Better still, pick a specific lawyer or firm that you trust and have that counsel named in an endorsement to the policy. Otherwise, the insurance carrier could select a lawyer who may not consider your interests to be a higher priority than those of the insurance company itself.

If you must accept the insurer's choice of counsel, you should find out whether that lawyer is experienced in employment law, which is a very specialized area. And just as with your malpractice policy, you will want to maintain as much control as possible over the settlement of claims. Ideally, no claim should be settled without your expressed permission.

As with any insurance policy you buy, be sure to choose an established carrier with ample EPLI experience and solid financial strength.

A low premium is no bargain if the carrier is new to EPLI, or goes belly up, or decides to cease covering employee practices liability. (As always, I have no financial interest in any company or product I discuss in this column.)

Above all, make sure that you can live with the claims definition and exclusions in the policy you choose and seek advice before you sign on the dotted line if you are unsure what your specific coverage needs are.

To respond to this column, e-mail Dr. Eastern at [email protected]

Most physicians have a feeling that they carry too much insurance and that most of their policies are too expensive.

The policies you should have and how much they should cost will be covered in next month's column, but no matter what is in your insurance portfolio now, there is one relatively inexpensive policy—one you probably have never heard of—that you should definitely consider adding.

Recently, I corresponded with a dermatologist in California who experienced every employer's nightmare: He fired an incompetent employee, who promptly sued him for wrongful termination and accused him of sexual harassment to boot.

The charges were completely false, he told me, and the employee's transgressions were well documented, but defending the lawsuit would have been expensive, so his lawyer advised him to settle it for a significant sum of money.

Disasters like this are becoming more common. Plaintiffs' attorneys know all too well that most small businesses, including medical practices, are not protected against such legal actions and usually cannot afford to defend them in court.

Fortunately, there is a relatively inexpensive way to protect yourself: Employee practices liability insurance (EPLI) provides protection against many kinds of employee lawsuits that are not covered by conventional liability insurance. These include wrongful termination, sexual harassment, discrimination, breach of employment contract, negligent hiring or evaluation, failure to promote, wrongful discipline, mismanagement of benefits, and the ever-popular emotional distress.

EPLI would have defended the California dermatologist, had he carried it, against his employee's charges. In fact, there is a better than even chance that the plaintiff's attorney would have dropped the lawsuit entirely once informed that it would be aggressively defended.

As with all insurance, you should shop around for the best price and carefully read the policies on your short list.

All EPLI policies cover claims against your practice and its owners and employees, but some policies cover only claims against full-time employees.

Try to obtain the broadest coverage possible so that part-time, temporary, and seasonal employees, and, if possible, even applicants for employment and former employees also are covered.

You also should look for the most comprehensive policy in terms of coverage. Almost every EPLI policy covers the allegations mentioned above, but some offer a more comprehensive list of covered acts, such as invasion of privacy and defamation of character.

Also be aware of precisely what each policy does not cover. Most contain exclusions for punitive damages and court-imposed fines, as well as for criminal acts, fraud, and other clearly illegal conduct. For example, if it can be proved that you fired an employee because he or she refused to falsify insurance claims, any resulting civil suit against you will not be covered by EPLI, or any other type of insurance.

Depending on where you practice, it may be necessary to ask an employment lawyer to evaluate your individual EPLI needs.

An underwriter cannot anticipate every eventuality for you, particularly if he or she does not live in your area and is not familiar with employment conditions in your community.

Try to get a clause added that permits you to choose your own defense lawyer. Better still, pick a specific lawyer or firm that you trust and have that counsel named in an endorsement to the policy. Otherwise, the insurance carrier could select a lawyer who may not consider your interests to be a higher priority than those of the insurance company itself.

If you must accept the insurer's choice of counsel, you should find out whether that lawyer is experienced in employment law, which is a very specialized area. And just as with your malpractice policy, you will want to maintain as much control as possible over the settlement of claims. Ideally, no claim should be settled without your expressed permission.

As with any insurance policy you buy, be sure to choose an established carrier with ample EPLI experience and solid financial strength.

A low premium is no bargain if the carrier is new to EPLI, or goes belly up, or decides to cease covering employee practices liability. (As always, I have no financial interest in any company or product I discuss in this column.)

Above all, make sure that you can live with the claims definition and exclusions in the policy you choose and seek advice before you sign on the dotted line if you are unsure what your specific coverage needs are.

To respond to this column, e-mail Dr. Eastern at [email protected]