No matter how complete your insurance portfolio, there is one policy – one you probably have never heard of – that you should definitely consider adding to it.
A while ago, I spoke 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, and the employee’s transgressions were well documented; but he was not insured against a suit of that type, and defending it would have been prohibitively expensive. He was forced to settle it for a significant sum of money.
Disasters like that are becoming more common. Plaintiffs’ attorneys know that most small businesses, including medical practices, are not insured against internal liability actions – and that settlements are cheaper than litigation.
Fortunately, there is a relatively inexpensive alternative: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 coverage would have permitted the California dermatologist to mount a proper defense against his employee’s groundless charges. In fact, there is a better than even chance that the lawsuit would have been dropped, or never filed to begin with.
Some liability carriers are beginning to cover some employee-related issues in “umbrella” policies, so before looking into EPLI, check your current coverage. Then, 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 litigation against your practice and its owners by employees, but some cover only full-timers. Try to obtain the broadest coverage possible so that claims from part-time, temporary, and seasonal employees, and, if possible, even applicants for employment and former employees, also are covered.
You should also 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 exclude punitive damages and court-imposed fines, as well as criminal acts, fraud, and other clearly illegal conduct. For example, you would not be covered if you fired an employee because he or she refused to falsify insurance claims.
Depending on where you practice, it may be necessary to ask an employment attorney 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.
As with any liability policy, try to get a clause added that permits you to choose your own defense attorney. Better still, pick a specific attorney or firm that you trust and have that counsel named in an endorsement to the policy. Otherwise, the insurance carrier will select an attorney from its own panel who may not consider your interests a higher priority than those of the insurer itself.
If you must accept the insurer’s choice of counsel, you should find out whether that attorney 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 express permission.
As with any insurance policy you buy, be sure to choose an established carrier with ample experience in the field and solid financial strength. A low premium is no bargain if the carrier is new to EPLI or goes broke.
Above all, as with any insurance policy, make sure that you can live with the claims definition and exclusions in the policy you choose, and seek advice if you are unsure what your specific needs are before signing on the dotted line.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters and is a longtime monthly columnist for Dermatology News. Write to him at.