EPLI Insurance and Employee Benefits in the Age of the Coronavirus

In a series of alerts, Michelman & Robinson will address the many issues facing employers once they begin to restart on-site operations as the coronavirus crisis eases and in what is to be the new normal. This installment focuses on the insurance issues employers need to be thinking about as they navigate the pandemic.

The current COVID-19 public health crisis and its dramatic impact on the workplace and employment are likely to give rise to an increased number of employment- and medical-related claims that should prompt an inquiry into applicable insurance coverage. As employees settle back into the workplace in a landscape informed by the coronavirus, employers may find themselves on the receiving end of COVID-19-colored lawsuits alleging anything from discrimination and violations of the Family and Medical Leave Act (“FMLA”) or wage and hour laws to causes of action stemming from sick leave policies and available medical benefits. Workers may also begin filing more complaints to the Occupational and Safety Health Administration (OSHA) based upon hazardous conditions in the workplace, should they perceive insufficient mitigation efforts by their employers.

Defending against allegations like these can be costly, which is why employers want to have their “ducks in a row” in terms of insurance coverage and the benefits they are providing to employees.

EPLI Coverage

A good starting point for any employer would be to consider obtaining employment practices liability insurance (EPLI). An EPLI policy provides insurance protection—in the form of the payment of legal defense costs and damage awards—against various types of claims by employees that their legal rights have been violated. No doubt, EPLI coverage can go a long way toward reducing potential financial exposure.

It is important to mention at the outset that there is no standard EPLI policy, and that coverage terms, conditions, and exclusions vary. Employers should thus carefully review their EPLI options and/or existing policies with their insurance brokers to determine what specific coverage exists. That being said, EPLI policies typically provide coverage against employee claims concerning, for example, alleged discrimination, wrongful termination, retaliation, breach of contract, failure to employ or promote, wrongful infliction of emotional distress, and mismanagement of employee benefit plans.

Generally, EPLI policies do not cover an employer’s costs for bodily injury claims or OSHA violations. As mentioned in a previous Michelman & Robinson alert, the Occupational Safety and Health Act (OSH Act) requires every employer to provide a workplace free from recognized hazards. But due to the risks involved with COVID-19, it is foreseeable that going forward more employees (for instance, those in the health care, transportation, and hospitality spaces) will claim that their employers have failed to make their workplaces safe. Because most EPLI policies will not cover the defense costs associated with investigations by or proceedings initiated under a health and safety law, such as the OSH Act—or, for that matter, claims arising under the FMLA or those alleging that an employer breached an emergency government order prompted by the coronavirus—employers will want to consult with their brokers about alternative insurance programs and products that may be available.

In any event, employers should thoroughly review their insurance policy portfolios as soon as possible to fully understand the extent of all coverages and exclusions. We further suggest that when obtaining EPLI insurance, employers should seek coverage that gives them a strong voice in the selection of the legal counsel that will represent their interests in any covered legal proceeding.

Employee Benefit Claims

The COVID-19 outbreak—and its resulting health-related fallout—will have a huge impact on claims associated with medical testing and treatment for full and part-time employees. To prevent potential lawsuits and penalties pursuant to, among other things, the Families First Coronavirus Response Act (FFCRA), Affordable Care Act (ACA), and/or OSH Act. employers should be aware of the required benefits they must offer employees.

Requirements for Employer Coverage of COVID-19 Testing and Treatment

Employers should note that the FFCRA generally requires an employer’s “group health plan” (whether insured or self-insured) to provide benefits for COVID-19 testing, including the related costs of any office, telehealth, urgent care, and emergency room visit. Such coverage must be provided without the imposition of any cost-sharing on the part of employees (including deductibles, copayments, and coinsurance), prior authorizations, or other medical management requirements.

Beyond the testing phase, the FFCRA does not impose requirements concerning employer coverage of COVID-19 treatment, and the regular coverage terms and cost-sharing provisions under an employer’s health insurance plan applies. Understand that some fully insured plans, and other self-funded plans not subject to ERISA, may be subject to additional state directives that may require coverage for COVID-19 treatment without cost-sharing. Consequently, employers should be sure to consider any state requirements in addition to those mandated by the FFCRA.

Requirements Concerning Eligibility and Continued Coverage

While employers may change eligibility requirements for coverage under group health plans, the ACA prohibits discrimination due to disability or various other protected classes. As such, employers will want to make sure any changes made to their group health plans do not trigger ACA penalties. Remember, health care coverage is to be provided for 95% of an employer’s “full-time employees.” In terms of furloughed employees, an employer’s specific coverage provisions determine whether they may continue active coverage.

Employers should also be aware that they must generally offer continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA) (or state continuation coverage) when there is a loss of coverage due to a termination of employment or reduction in hours (all too prevalent in today’s environment tainted by the coronavirus). Failure to do so may result in claims from former beneficiaries, suing for medical expenses incurred during the COBRA period. As it is unlikely that insurance carriers would be willing to pay for these benefits, and the employer would likely be held responsible, an employer’s exposure in such cases could be high.

Miscellaneous Benefits

Employers should get up-to-speed on their life, accidental death and dismemberment, and disability policies, and determine if such insurance remains in place for employees who are not actively working or who are working reduced hours as a result of the pandemic.

Workers’ Compensation

Even as employers begin to reintegrate their workforces back to their on-site workplaces, many employees will continue working from home, at least for the foreseeable future. When workers operate remotely, employers have some limited responsibilities for these employees’ health and safety, requiring them to provide Workers’ Compensation benefits to those injured while telecommuting. The OSH Act provides that an injury/illness that occurs in such a circumstance will be considered work-related if it occurs while the employee is working for compensation. The injury/illness must also be directly related to the performance of work, as opposed to the general home environment. Of note, for COVID-19 to be considered work-related, there must further be evidence that the employee contracted the illness while on the job.  A more detailed alert on Workers’ Compensation issues will be posted soon.

As your employees begin to return to the workplace, you may have questions regarding the issues conveyed in this alert. Rest assured that M&R is ready to answer your queries, review your policies, and help you design an appropriate insurance program for your company.

Source: Michelman & Robinson, LLP, “EPLI Insurance and Employee Benefits in the Age of the Coronavirus” https://www.mrllp.com/ website. Accessed June 9, 2020. https://www.mrllp.com/alert-epli-insurance-and-employee-benefits-coronavirus.html

© Copyright 2020. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented.

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