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Article | FINEX Observer

Client alert: COVID-19 response and employment practices liability concerns – Part II

Financial, Executive and Professional Risks (FINEX)
COVID 19 Coronavirus

By Talene M. Carter | April 1, 2020

The situation with the COVID-19 pandemic is changing dramatically and so are the implications to employment practices liability insurance coverage.

Since our initial alert on March 6, 2020, the COVID-19 pandemic has changed dramatically. In our earlier alert, we discussed some of the potential exposures and insurance implications from an employment practices liability (EPL) perspective. This article will discuss the employment-related implications with COVID-19 and the EPL insurance coverage in more detail.

As discussed in our earlier alert, COVID-19 response and employment practices liability concerns, EPL claims that may arise as a result of COVID-19 could include discrimination (using national origin as a basis for suspecting infection, applying workplace policies and procedures related to COVID-19 in an inconsistent manner), privacy issues (disclosing confidential information about an infected employee, questioning employees on their personal health status), failure to accommodate (disability discrimination), retaliation, and Family and Medical Leave Act (FMLA) leave, among other things. In addition, so many employees working remotely brings significant wage-and-hour concerns, such as, tracking “off the clock” work and overtime.

EPL insurance provides coverage for claims alleging discrimination, harassment, retaliation, wrongful termination and other workplace torts that are made by employees. EPL policies provide coverage for the organization and insured persons (which is a defined term in each policy, but typically includes employees, directors and officers). It also provides coverage for claims made by third parties (non-employees) of discrimination and harassment only.

To trigger coverage, there must be a claim, which is a written demand for monetary or non-monetary relief1 that alleges one of the enumerated wrongful acts within the policy. Once coverage is triggered, then we must evaluate the definitions and exclusions that may apply.

  1. 01

    Bodily injury exclusion

    Most EPL policies have a bodily injury exclusion that precludes coverage for claims alleging bodily injury, sickness, disease or death. If the exclusion is written as an absolute exclusion, then any claim that is based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving bodily injury, sickness, disease or death of any person may be excluded. If, however, the exclusion is written on a narrower basis, then only claims for actual or alleged bodily injury, sickness, disease or death of any person may be excluded. In both instances, however, a carveback for mental anguish, emotional distress and humiliation may be available.

  2. 02

    Benefits exclusion

    EPL policies also preclude coverage for benefits that the organization is obligated to pay its employees. Specifically, coverage is excluded for loss on account of any claim for any obligation pursuant to any worker’s compensation, disability benefits, unemployment compensation, unemployment insurance, retirement benefits, social security benefits or similar law. The exclusion, however, does not apply to a claim that alleges retaliation.

    Therefore, claims by employees who have been affected by COVID-19 (either directly or indirectly) that are alleging failure to provide worker’s compensation, unemployment, social security or disability benefits may not be covered, except where there is also an allegation that the employee was retaliated against for exercising these rights under the law.

  3. 03

    Worker Adjustment and Retraining Notification Act (WARN Act) exclusion

    Given the mass layoffs that are occurring, the WARN Act exclusion may also be applicable. This precludes coverage for any claim alleging violations of the responsibilities, obligations or duties imposed by the WARN Act, or any similar provisions of any common or statutory federal, state or local law. Like the benefits exclusion, the WARN Act exclusion carves back coverage for that part of any claim alleging retaliation for exercising their rights under the law.

  4. 04

    Family Medical Leave Act (FMLA)

    While some EPL policies cover claims alleging violations of the FMLA, some do not. Given the increase in employees seeking FMLA leave, there may also be an increase in claims alleging violations. For the policies that do have an FMLA exclusion, there may be a carveback for retaliation claims. The extent to which the FMLA claims are covered will depend on how the FMLA is addressed within each individual policy.

  5. 05

    Definition of loss

    EPL policies generally provide coverage for damages, settlements and judgments, which include back pay, front pay and pre/post-judgment interest. The policies typically do not cover employment-related benefits. However, most EPL policies provide defense cost coverage for those items excluded from the definition of loss, such as, employment-related benefits.

    While other exclusions and definitions may apply, the above highlights the parts of the EPL policy that we anticipate having to address with COVID-19 claims. As such, it is important to work with your insurance professionals to ensure proper wording in your EPL policy.

    In response to the employment implications of COVID-19, markets may ask more questions about your organization’s COVID-19 policies and protocols at the time of renewal. Be prepared to answer questions as to whether there were reductions in force, furloughs, or business closures, and the process used to determine which employees would be impacted.

    There may also be questions surrounding the organization’s handling of employees who become ill or exposed to ensure compliance with relevant privacy laws. As such, it is best to work with counsel to ensure compliance with legal obligations and to ensure that all decisions and new protocols are being made and implemented in a consistent manner to avoid disparate impact.

    It is also recommended that organizations communicate with employees, particularly line managers, to remind all of the organization’s discrimination and harassment policies, and to ensure that managers are aware of how to handle employee concerns and complaints surrounding COVID-19. Finally, because many EPL policies are claims made and reported policies, it is critical to report all claims to your insurance claims professionals in a timely manner to avoid late notice issues.


Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage.

The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication.

Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates.


1 This includes emails, attorney demand letters and EEOC Notices of Charge.


Talene M. Carter
Employment Practices Liability Thought & Product Leader

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