Managing Medical Lawsuit Risk with EPLI Insurance

In last week's discussion on medical practice employee risk I explained the first layer of required asset protection and the vital role of a professionally drafted employee manual. In that discussion I provided an employment law expert's advice on why your practice needs a custom manual and provided an outline covering what it should address at the very minimum. Today I will address the second layer you must have in place, commonly referred to as EPLI or employment practices liability insurance.

What is EPLI insurance?

EPLI insurance is specialty "P&C" (property and casualty) coverage that is meant to protect you from the risks of employee lawsuits against your practice. Unlike most insurance it will also cover certain cases involving "intentional acts," an important gap in most insurance coverage you must understand when evaluating your own asset protection planning. This coverage won't help when you have actions that are consistent, implemented by and known to the organization itself, but it will be an important distinction if the harm complained of is by an employee or manager that is outside the scope of the organization's policies (like the ones found in the manual) and was unknown to the employer. Said in plain English, if you have institutionalized illegal or actionable employment practices as part of how you do business EPLI insurance won't help. If this is a result of an individual employee or manager generating liability for your practice by not following the rules, it likely will.

Isn't this already covered by my existing insurance?

No, or at least not enough. In my experience with practices across the country the majority of these policies don't provide any coverage at all. Those that do through riders or bundled programs don't have high enough limits to cover the costs typically involved. Your EPLI coverage should be at least $1 million or more, not the $50,000 or $100,000 we typically see in a base policy, if it is even covered at all. Six figures in legal expense and six figure awards are now both routine, and that assumes a single plaintiff. The exposure on a class action type suit is a multiple of those figures.

This insurance addresses specific risks that are not adequately covered by your three basic polices: your worker's comp policy (aka: employee hurt on the job coverage), general liability policy (slip and fall or some other injury or non-medical liability related to the business, and your medical malpractice insurance.

What kinds of employment claims are (and perhaps more importantly, are not) covered?

This is obviously a very policy-specific question, so make sure your insurance agent is knowledgeable about the all options available in this area, and can give you a very specific list of what is covered and what is not. Actions that are commonly covered include various types of harassment and discrimination (sex, age, race, disability, etc.), as well as some general civil torts, like defamation and intentional inflection of emotional distress, which is typically part of one of the claims previously outlined.

What is excluded in many cases falls under some sort of institutionalized pattern of an illegal employment practice that is known, open, and part of your practice's policies. Retaliatory claims and actions seem to be a hot button issue that insurance companies almost universally exclude. There are a number of statutory liabilities that may or may not be covered as well for violations of federal or state law, so making sure your practice is compliant on issues like OSHA standards, fair wage and labor laws, COBRA insurance requirements, and other HR-related details is important as well.

Finally, I can't stress strongly enough that "just insuring" is typically not enough to protect you from most risks, including this one. I've addressed employment-related risk as something that requires several layers; these layers should include a personal asset protection plan for medical practice owners and executives, and should account for the fact that both "consent to settle" (the insurance company, on its own, can decide to settle rather than fight) and "defense inside the limits" (if you have a $1 million policy and $400,000 is spent on legal costs, that leaves $600,000 for any adverse award, which comes off your end) can significantly reduce your protection.