Changes to EPLI Employment Practices Liability Insurance California LA Labor & Wage Violations Report

Employment Practice Liability Insurance (EPL) provides protection for an employer against employee claims, former employee claims, or claims made by potential employees based on discrimination, wrongful termination, harassment, and other allegations. If you are a California employer, you should know that labor and wage violations are higher in Los Angeles, CA than in any other major cities nationally. You should also know that getting insurance to protect your company or firm may soon be much more difficult.

Today’s EPL policy may no longer be available in Southern California, as well as other regions. This news follows the disturbing report issued by UCLA’s Institute for Research on Labor and Employment that found a shocking “9 out of 10 workers in Los Angeles County experienced wage theft and 80 percent did not receive legally mandated overtime”. The same report showed that “Los Angeles workers were more likely to suffer wage and labor violations than those in New York or Chicago”.

In light of this report, it is expected that many insurers will take aggressive steps to reduce their exposure in Southern California or risk an avalanche of losses. Failure to protect themselves would force insurers to face complete withdrawal from this essential venue.

• The first signs of restriction will be the elimination of Wage and Hourly coverage; a key coverage enhancement available in most policies that provides coverage for the very violations noted above.

• Expect the “Full Prior Acts” coverage term to be replaced by a strict Retro Date Inception (RDI) for first time policyholders, as insurers will look to favor their current policyholders over the “late comers”.

• New applicants for coverage will be forced to deal with stringent underwriting standards and may not be able to secure coverage at any cost (much like homeowners trying to re-finance their mortgage).

• Immediately following a series of coverage/underwriting restrictions, increases in retentions and premiums are sure to follow.

The bottom line is this: the signals for an extremely difficult EPL market are out there and firms that do not secure coverage IMMEDIATELY may be left out in the cold when they need the coverage the most. Since EPL is tied closely with Directors and Officers Liability, the impact on the EPL coverage line will undoubtedly affect D and O as well. So if you do not secure these coverages in the next 60 days, your options will not resemble what they could have today.

HCP National Insurance is an EPLI (Employment practices brokerage) company, who works with Rubicon Insurance Services – our affiliate and author of this blog. HCP National Insurance is not a law firm, but an Employment Practices Liability Insurance, Directors and Omissions, and Errors and Omissions insurance brokerage whose home office is in Aliso Viejo, CA.

NOTE THE ABOVE IS A GENERAL DISCUSSION ABOUT HOW COVERAGES MAY WORK. YOUR INSURANCE POLICY AND ALL ADDENDUM ARE THE ONLY AUTHORITY OF HOW YOUR COVERAGE WORKS. DO NOT RELY ON THIS ARTICLE AS AN EXPLANATION OF YOUR COVERAGE. HAVE YOUR ATTORNEY REVIEW YOUR ENTIRE POLICY WITH YOU TO DETERMINE WHAT IS AND ISN’T COVERED.