Employment Practices Liability insurance provides cover for any alleged employment related wrongful acts of directors, officers and employees of a company and the company itself. It also provides legal representation expenses in respect of employment investigations.
A claims made, claims reported policy requires the insured to give the insurer notice of any claims it becomes aware of during the policy period.
In a claims made, claims reported policy, a notice of circumstance or a claim should be reported in writing to the insurer as soon as practicable and during the policy period in order for the notice of claim to be considered timely.
A notice of circumstance is not a claim, but rather a potential claim which is defined as circumstances that might give rise to a claim in the future. A claim is defined as 1) any written demand; or 2) any civil or arbitral proceeding; or 3) any criminal prosecution; or 4) any legal administrative or regulatory proceeding. In the event a claim is made after the expiration of the policy period, the policy would treat the claim as being made when it was first reported as a circumstance.
The policy does not cover the cost of bringing proceedings and should not be mistaken for a legal expenses policy.
The EPL policy is not a duty to defend policy whereby it does not require the insurer to assign its own law firm to represent the insured. Although the insured retains the responsibility to assign its own counsel, it must provide written details of the law firm it selects, their proposed billing rates and budget, and request the consent from the insurer. At the request of the insured, the insurer may provide suggestions regarding selection of a suitable defence firm.
Chubb has a physical presence in over 50 countries serving the insurance needs of commercial and individual customers in more than 170 countries. It is therefore able to tap into its network for local advice and assistance as required.
Typically, in complex cases, Chubb retains its own monitoring law firm based in either the UK or in other countries depending on where the action is filed and which jurisdiction governs the policy. This firm assists our understanding of the quantum and liability aspect of the claim, coverage analysis and monitors progress alongside the defending law firm. The costs of a monitoring law firm do not erode the available limit of indemnity.
The insurer establishes if costs are deemed reasonable by taking into account the complexity of the case and local law society billing guidelines. They would not typically include a success fee mark up or other loading. Since all costs should receive insurers’ consent prior to being incurred, it is wise to ensure such approval is obtained to avoid any later debate over what is reasonable.
It is possible but rarely desirable to have multiple law firms engaged in the defence of several insureds. Since defence costs erode the limit of liability it is preferable to limit the number of firms acting other than where true conflicts exist between the individuals. Also by retaining one law firm to represent all, a more united front is demonstrated to the claimant, which can offer a strategic advantage.
Please note that the above represents the position where the policy is subject to the laws of England & Wales. Different considerations may apply where the policy is subject to other jurisdictions.