Jim Baffa, Assistant Vice President, Berkley Select Claims, Discusses How Employers can Avoid Potential Claims
In this two part thought leadership series, Berkley Select's Assistant Vice President of Claims gives an informative overview of industry-wide EPL claim trends that evolved in 2024 and how employers can proactively manage risks this year to reduce the likelihood of employment-related claims.
Jim, how can employers proactively manage risks to reduce the likelihood of employment-related claims?
Document everything, particularly adverse performance by employees. Social inflation is real. And if you don’t have documentation, juries may not believe an employer – however accurate and honest – that claims an employee’s termination was due to performance issues instead of more nefarious reasons. Contemporaneous documentation of employee performance simply makes claims cost less.
On a related note, don’t tolerate bad acts by your employees. A significant volume of EPL claims result from an employer’s insufficient discipline of problematic employees who are creating negative environments in the workplace. Implement a “no jerks” policy. Not only will corporate culture improve, but the company will save money in the long run due to reduced claim frequency and severity.
EPL Insurance is also critical. Berkley Select has partnered with Zywave, an established HR risk management company offering compliance help, to provide pre-claims assistance when an employer has a question in their day-to-day business.
Such guidance and clarification from a partner like Zywave can quickly assist employers when confronted with a novel or difficult situation. Our insureds have access to Zywave’s HR Hotline for real-time consultation on employment related issues, to take required, state-based harassment trainings and other corporate trainings free of charge, and for tools and templates such as an employee handbook builder and minimum wage bulletins. Zywave also provides comprehensive updated content on new HR laws for federal and state compliance.
What are the key factors for an employer to consider when choosing an EPL policy?
Insurer experience, expertise and stability should be considered, as not all insurers are created equal. Berkley Select has been writing EPL insurance for over 30 years and our underwriting and in-house claims personnel are second-to-none.
With respect to the policy itself, limits and deductibles should be selected based on the insured’s financial condition, industry and overall exposure. Larger employers and companies in industries prone to more liability, like hospitality, food service and health care, may warrant higher limits and broader coverage generally. Higher deductibles may reduce premiums, for the cost-conscious insured. It is difficult to craft a one-size-fits-all solution, so companies should work with their insurance broker and the insurer’s underwriting personnel to determine what may be best for the company and budget.
Where do you predict EPL claims will see an influx in, or reduction in, for 2025?
I predict that EPL claims will continue to rise in frequency and severity in the short-to-intermediate term. Increased frequency may be due to a variety of factors, including increased awareness of discrimination and harassment in the workplace, higher employment rates nationwide and an increasingly transient workforce, in addition to an aggressive and sophisticated Plaintiffs’ bar.
Exorbitant non-economic damages will continue to drive increased severity, as discussed above. In this respect, in my opinion, juries are awarding exorbitant non-economic damages, which may be intended to punish the employer for perceived misdeeds, not compensate the employee for harm (which is not an appropriate way to award damages, absent a conclusion that punitive damages are warranted). And the potential for higher jury awards leads to higher settlement values, a fact that Plaintiffs’ lawyers have exploited in the course of dispute resolution.
Given the above, there has never been a better reason to invest in EPL insurance with us here at Berkley Select.