Frequently Asked Questions
- What is Directors & Officers Liability Insurance?
- Should Privately Held Companies Consider Buying D&O?
- Who is insured under a D&O policy?
- What about the company itself, since it may be a defendant in many claims that could be asserted against directors and officers?
- Who can bring the types of claims typically covered by a D&O policy?
- What is typically excluded under a D&O policy?
- Wouldn't an exclusion for fraud or personal profiting eliminate coverage for most claims?
- What exactly does a D&O policy cover in terms of expenses?
- What will a D&O policy usually not cover as loss or damages?
- What is Employment Practices Liability Insurance?
- Why do small businesses need EPL coverage?
- Why would a reputable well-run business need EPL insurance?
- What's changed that now makes EPL insurance important for small-to-medium sized businesses?
- What advantages does Provident Financial Group's EPL insurance have to others in the market?
- What loss prevention services does Provident Financial Group's EPL program include?
- How much does Employment Practices Liability insurance cost?
- What laws and statutes create the necessity for EPL?
- Does the EPL endorsement provide coverage for claims brought by customers and other non-employees?
- What limits and deductibles are available?
- Does the EPL limit include defense costs?
- How do you define "small-to-medium sized business" - is there a maximum employee count?
- How is employee count calculated?
- Are there any classes that are ineligible for the program?
- Can we (the agent) or our insureds opt-out of EPL coverage?
- Is the EPL coverage written on a claims-made or occurrence basis?
- When is the insured obligated to pay the deductible?
- What type of legal representation is provided with the coverage?
- How will this protect our agency from an E&O claim?
Most Popular Services
- Employment Practices Liability
- Insurance that provides coverage for claims arising out of employment practices. EPLI policies generally cover the organization, its directors, officers, and employees.
- Directors and Officers Liability
- Insurance that provides coverage against wrongful acts which might include actual or alleged errors, omissions, misleading statements, and neglect or breach of duty on the part of the board of directors and other insured persons and entities. Many D&O policies include employment practices liability coverage.
- Fiduciary Liability
- Protects the fiduciaries of health and welfare, or pension plans from claims by employees alleging financial loss due to mismanagement of funds.
- Q : What is Directors & Officers Liability Insurance?
Directors and Officers Liability Insurance (often called D&O) is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnifications for certain damages (losses) or advancement of defense costs in the event any such insured suffers such a loss as a result of a legal action (whether criminal, civil, or administrative) brought for alleged wrongful acts in their capacity as directors and officers (as to the individual directors/officers) or against the organization(s) (either for securities claims or - if private - other actions against the organizations themselves). Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. It has become closely associated with broader management liability insurance, which covers liabilities of the corporation as well as the personal liabilities for the directors and officers of the corporation.- Q : Should Privately Held Companies Consider Buying D&O?
A common misconception is that only large, publicly traded companies should be interested in buying D&O because of the responsibilities their directors and officers have to shareholders and due to the close scrutiny to which they are held by the Securities and Exchange Commission. The reality of today's corporate legal climate, however, suggests that smaller, privately held companies are equally vulnerable to litigation.
The directors and officers of private companies should consider the following:
- The directors and officers of privately held companies often work in more demanding environments than their larger, public counterparts. They may try to cover more corporate bases, unique conflicts of interest may exist and their activities may be conducted under less efficient or effective conditions.
- The applicable standards of conduct are identical to those to which directors and officers of large, public corporations are held. Although there are typically fewer shareholders, there are usually a number of potentially adverse shareholders and other possible claimants.
- Bad decisions, even those made in good faith, are likely to be more visible in a small environment and attract the attention of shareholders, regulators and others.
- The costs of defending corporately targeted lawsuits may exceed the net worth of most of a company's directors and officers. Judgments can be financially crippling.
- A small to medium size company may have difficulty attracting qualified individuals to its board without Directors and Officers Liability.
- In small and mid-size companies, decisions made by directors and officers typically impact finances more quickly than in larger companies.
- The directors and officers of privately held companies often work in more demanding environments than their larger, public counterparts. They may try to cover more corporate bases, unique conflicts of interest may exist and their activities may be conducted under less efficient or effective conditions.
- Q : Who is insured under a D&O policy?
The simple answer is that directors and officers are covered under a Directors & Officers Liability policy, but this is not a complete answer. While traditionally only the directors and officers themselves were covered under a D&O policy, today this may be expanded to include managers and other non-executive directors, employees and the company itself.- Q : What about the company itself, since it may be a defendant in many claims that could be asserted against directors and officers?
Today, most D&O policies for publicly traded companies also insure the company itself but only for securities claims. Most D&O policies for privately held or not-for-profit organizations include coverage for the company for an array of claims (not limited to securities claims).- Q : Who can bring the types of claims typically covered by a D&O policy?
Claims can be brought by the company's stakeholders (owners, investors, lenders, employees and securities holders, including bondholders). Claims can also be brought by customers, consumer groups, competitors, business partners (venders and suppliers) and government enforcement/regulatory groups.- Q : What is typically excluded under a D&O policy?
Standard exclusions include fraud, personal profiting, accounting of profits, and other illegal compensation exclusions, pending and prior litigation, prior (late) claim notice, bodily injury/property damage, pollution, insured versus insured claims and ERISA (the Employee Retirement Income Security Act of 1974). Insurers may also include other exclusions based on their own claims payment experience, such as hostile takeover or captive insurance company exclusions. Some exclusions pertain to areas usually covered under some other type of insurance. ERISA violations are usually covered under a Fiduciary Liability policy, property damage may be covered under a General Liability policy, etc.- Q : Wouldn't an exclusion for fraud or personal profiting eliminate coverage for most claims?
While a large percentage of D&O claims include allegations of fraud or illegal personal profiting (or both), the simple allegation is not enough to trigger the exclusion. Most, if not all, such exclusions require something like a court determination of guilt or an admission of guilt before the exclusion can apply. Either the words "final adjudication" or "in fact" will be used in the exclusion to indicate how high the hurdle is for the carrier to apply these exclusions. Defense costs incurred for such a claim are typically covered by the policy until such time as the wrongful conduct is determined to have "in fact" occurred, or until there is a final adjudication. This means that a settlement without an admission of wrongdoing usually does not trigger the exclusions. In the event there actually is a finding of fraud or personal profiting, those directors and officers who are not found guilty continue to be covered even after others may have confessed or been adjudged guilty.- Q : What exactly does a D&O policy cover in terms of expenses?
A D&O policy will generally either pay or reimburse the company the costs associated with the defense, investigation, negotiation and settlement (by way of a court determination or otherwise) of a covered claim. This includes attorneys' fees, court costs and filing fees. It may also include expert or other specialist fees that are consented to in advance by the carrier. Most policies include the phrase "reasonable defense costs." Therefore, some carriers may object to some element of expenses as being unreasonable (either because the amount charged is excessive, the work is duplicative, or the services rendered were unnecessary). In all events, the carrier only pays for or reimburses those expenses that are consented to in advance. In addition to expenses, D&O policies cover judgments/verdicts and settlements. Although the actual term used may differ (some carriers cover "loss" while others cover "damages"), all typically cover any court award or settlement, plus defense expenses.- Q : What will a D&O policy usually not cover as loss or damages?
Covered loss will usually specifically exclude civil, criminal or punitive fines or penalties; exemplary or multiplied damages; amounts that are without legal recourse to an insured; or amounts that are uninsurable under the law. As with many other aspects on D&O policies, this can be modified by insurers. Many now agree to pick up certain fines and penalties and agree to provide coverage for punitive damages where insurable by law, especially for securities claims.- Q : What is Employment Practices Liability Insurance?
Provident Financial Group's Employment Practices Liability (EPL) insurance protects eligible Commercial Business and Agribusiness employers from employees' claims alleging discrimination, wrongful termination or harassment, including sexual harassment.
EPL insurance pays for liability damages and defense costs due to such charges brought by full-time, part-time, temporary and seasonal employees.- Q : Why do small businesses need EPL coverage?
About 50 percent of EPL charges are filed against small businesses. Employment laws that employees may use as a basis for action against their employer apply to the majority of businesses including small firms.
Even groundless employment charges may require legal defense, the cost for which is potentially significant - often $10,000 or more. Insureds need EPL coverage to have such defense costs covered and to get access to specialized attorneys experienced in defending employers from employment-related charges.
Small businesses often don't have Human Resource professionals to develop the formal personnel policies and procedures necessary to help prevent employment-related charges.- Q : Why would a reputable well-run business need EPL insurance?
No matter how well they run their business, an employee can allege anything at anytime.
Employers need to defend themselves from employment-related charges, even if the charges are without merit.
EPL coverage pays for defense costs even when the charges are groundless. Defense costs can be significant, well beyond what many small businesses can afford to pay. Eighty-one percent (81%) of EPL claims are resolved for between $22,400 and $40,500.- Q : What's changed that now makes EPL insurance important for small-to-medium sized businesses?
Today's business and legal climate is different today than it was years ago. Employees are more aware of employment laws, their rights and how to exercise their rights by taking action against employers.
Federal and state employment related laws and regulations have been broadened.
Employees see a lot of news coverage and publicity about employment cases and awards against employers.
The workforce is more diverse with women, older workers and minorities representing a significant percentage of employees.- Q : What advantages does Provident Financial Group's EPL insurance have to others in the market?
Provident Financial Group's EPL coverage was specially designed to meet the needs of small-to-medium sized employers without the high deductible, retention, and/or coinsurance amounts often experienced with purchasing EPL insurance intended for large employers.
It's affordable and costs only a small fraction of the premiums charged for EPL insurance when sold as a separate policy.
There's no need to complete a separate EPL application if the employer has 50 or less employees.
EPL coverage is conveniently packaged with the insured's Commercial Business or Agribusiness policy. There's no additional policy to handle.
Coverage is on a par with many of the EPL insurance products offered to large businesses.
Claim service is provided by dedicated EPL claim specialists.
Insureds needing legal defense are represented by experienced, specialized employment law firms whose services would normally be cost prohibitive for smaller employers.
Provident Financial Group's program includes an EPL loss prevention website where your agency and insureds can access information and tools to help minimize exposure to employment claims.- Q : What loss prevention services does Provident Financial Group's EPL program include?
Provident Financial Group's program includes an EPL loss prevention website that provides employers with tools and information to help them avoid situations that can lead to an employment claim.
The tools in Provident Financial Group's EPL loss prevention website can help an employer document evidence of efforts to "prevent or correct" unlawful employment practices which often is critical for an employer's defense to present when facing an EPL charge.
It provides insured employers access to important information such as:- EPL Risks and Loss Examples
- Applicable employment laws
- Model employment policies and procedures
- Library of recent developments in employment law and
- Library of EPL frequently asked questions (FAQ's)
- Q : How much does Employment Practices Liability insurance cost?
At an aggregate EPL Limit of Liability of $100,000 and a deductible of $5,000, Provident Financial Group's EPL coverage would cost $55.71 per employee.
Our program costs a small fraction of what separate EPL insurance policies cost which are often $2,000 or more.- Q : What laws and statutes create the necessity for EPL?
The need for Employment Practices Liability insurance arises from a number of federal, state, and local laws under which employees may bring actions against their employers for such matters as sexual harassment, discrimination and wrongful termination.
Title VII - A federal law enacted in 1964 and amended by the Civil Rights Act of 1991. Title VII prohibits discrimination or harassment on the basis of race, color, religion, gender, or national origin. Title VII also created the Equal Employment Opportunity Commission (EEOC) as a venue for employment-related grievances.
The Equal Pay Act of 1963 - Prohibits unequal pay for men and women serving in substantially the same position.
The Age Discrimination in Employment Act of 1967 - Prohibits discrimination against persons who are 40 years of age or older.
The Americans with Disabilities Act of 1990 - Prohibits discrimination against people with physical or mental disabilities. Employers also must make any "reasonable accommodations" for their disabled employees to conduct their duties as long as such an accommodation does not pose an undue hardship on the employer.
The Family and Medical Leave Act of 1993 - provides that an employee can take up to 12 weeks of unpaid leave to care for a new child or a seriously ill family member, including themselves.
Fair Employment Practices statutes - Individual state statutes that expand many of the protections provided under federal laws. These laws increase the protected classes to include such classifications as sexual orientation, transgender, medical conditions, obesity and others. These laws also extend their reach so that they apply to even the smallest employers and also lengthen the statutes of limitations. Additionally, the states have created Fair Employment Practices Agencies (or FEPAs) as the state equivalents to the EEOC.
Common Law - Employees can also allege such tortious acts as violation of their civil rights, infliction of emotional distress, invasion of privacy and others under common law.- Q : Does the EPL endorsement provide coverage for claims brought by customers and other non-employees?
No. Our EPL insurance provides coverage for claims brought against an employer by a full-time, part-time, seasonal or temporary employee only. Claims brought by individuals other than employees, including independent contractors, are not covered.- Q : What limits and deductibles are available?
Provident Financial Group provides Employment Practices Liability Coverage with a default limit of liability of $100,000, subject to a default deductible of $5,000. Available limits of liability range from $25,000-$250,000, with specific deductible options ranging from $2,500-$25,000. Two higher limits of liability, namely, $500,000 and $1,000,000, are available on a "refer to company" basis. With respect only to these two higher limits of liability, a $50,000 deductible option is also available on a "refer to company" basis.- Q : Does the EPL limit include defense costs?
Yes. Defense costs are included within the limit of liability. That means that the limit is reached by a total of both defense costs and indemnity payments. Thus, the limit of liability available to pay judgments or settlements under EPL Coverage will be reduced, and may even be completely exhausted, by the amounts incurred for defense costs. The applicable deductible amount may be similarly reduced or exhausted by such incurred defense cost amounts.- Q : How do you define "small-to-medium sized business" - is there a maximum employee count?
Yes. Eligibility for Provident Financial Group's EPL Coverage is limited to a maximum of 50 or less total employees across all locations. Policies with more than 50 employees and less than or equal to 250 employees are eligible only on a "refer to company" basis, subject to completion of a supplemental application and underwriting approval. Policies with more than 250 employees are not eligible.- Q : How is employee count calculated?
Employee count is determined by adding together all full-time, part-time, seasonal and temporary employees as well as any owners, directors, and officers. Each employee is counted as one regardless of their status as full-time, part-time, seasonal, etc.- Q : Are there any classes that are ineligible for the program?
Yes. While most classes will be eligible for our EPL program, the following classes are ineligible: law firms, employee leasing firms, temporary help firms, private golf clubs, municipalities and schools.- Q : Can we (the agent) or our insureds opt-out of EPL coverage?
Yes, while we would advise our clients to retain the coverage so they are not at risk, you or your insureds may request that EPL coverage be removed from their policy.- Q : Is the EPL coverage written on a claims-made or occurrence basis?
EPL coverage is written on claims-made and reported basis, meaning that a claim must be made against the insured and reported to Provident Financial Group within the policy period (or within a subsequent renewal period assuming there has been continuous coverage) and the wrongful act occurred after the effective date of the first EPL policy written by Provident Financial Group.- Q : When is the insured obligated to pay the deductible?
Assuming a $5,000 deductible, the insured is responsible for the first $5,000 of covered loss. Above the deductible amount, EPL insurance would pay additional covered loss within the limit of liability.- Q : What type of legal representation is provided with the coverage?
Our EPL coverage includes legal representation by law firms specializing in employment law. In the event that a claim warrants defense, we will choose and retain one of these law firms to represent the insured.- Q : How will this protect our agency from an E&O claim?
Our EPL program allows you to provide your insureds with meaningful coverage at an affordable premium in a very easy to administer manner. Coverage not only protects insureds, it also protects your agency. If an insured suffers a loss and this coverage was not offered, your agency may have an increased exposure to an E&O claim.
