"Finding a middle market EPLI carrier is getting more difficult"

How the pandemic has impacted insureds' ability to secure this coverage

"Finding a middle market EPLI carrier is getting more difficult"

Professional Risks

By Alicja Grzadkowska

The coronavirus pandemic has brought new professional liability challenges forward for companies, as have other developments, such as the US Supreme Court’s historic decision in mid-June that the 1964 Civil Rights Act protects gay, lesbian, and transgender employees from discrimination based on sex. However, the impact of these events has so far been uneven across the professional liability market.

For example, in the employment practices liability insurance (EPLI) space, one expert hasn’t seen significant changes with his carriers when placing the coverage … not yet, anyway.

“While I’m able to access approximately 15 middle market carriers, the majority of my EPLI book is primarily placed through two of them. Both are key middle market carriers, and, fortunately, my EPLI book is a great fit for both of them,” said Michael S. Graves, senior vice president and broker at Worldwide Facilities, noting that in regards to the Supreme Court rulings, his carriers aren’t making changes yet. “I even spoke to both carriers that I place a big portion of my business with to see if they see big changes in the horizon, and there wasn’t any to report at this time.”

Nonetheless, there have been some notable trends in EPLI-related losses from incidents that rocked the professional liability market in previous years and have left a permanent mark on companies. For instance, not too long ago, the #MeToo movement was an issue for Graves’ markets.

“The concern was that we would start to see a big increase in sexual harassment claims as people were feeling less threatened to come forward and file a claim,” he explained. Nonetheless, this development was soon overshadowed by the COVID-19 shutdowns taking place in many parts of the US.

Now, thanks to the economic uncertainty that has followed the pandemic, Graves sees carriers asking a number of questions about insureds’ lay-offs and planned reductions in the workforce.

“If there has been a recent reduction or they have a planned reduction in the near future, that will affect the quoting process. If the insured’s answers are ‘yes,’ then the pricing goes up as well as the retentions,” he explained. “If the lay-off was big enough, it may even become a decline for the carrier. At the very least, I’m now seeing a reduction in workforce exclusion on the quotes.”

Carriers’ cautious approach stems from the fact that there has been an increase in claims coming from the growing number of people who are out of work, and include claims for wrongful termination, claims that an employee was terminated because they or a close family member contracted COVID, and claims of discrimination if a company brought some employees back to work before another employee was hired on again.

In turn, while Graves noted that he hasn’t witnessed major changes in his book yet due to the pandemic, key challenges have started to make themselves known in the EPLI arena.

“Because of the COVID pandemic, a number of carriers have decided they will not quote a first-time buyer due to concerns that they are purchasing the coverage out of fear of potential lawsuits for wrongful termination. Some carriers have gone as far as to decide not to write any new business for the time being until we get further through this pandemic,” said Graves, adding that, as a result, “Finding a middle market EPLI carrier is getting more difficult. We lost four of our carriers that will write in California over the past year. The ones still writing this business have really restricted what they are willing to entertain. Some of them will not entertain first-time buyers, while others have moratoriums on new business by counties.”

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