The purpose of third-party coverage in an Employment Practices Liability Insurance (EPLI) — Domino's Pizza Franchisee Program policy is to protect an organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers.
Some policies also cover wrongful acts committed by third parties against the insured’s employees.
Harassment and all forms of discrimination are covered under wrongful acts. Discrimination claims include discriminatory practices against a person based on their race, religion, age, sex, national origin, disability, pregnancy or sexual orientation. Harassment involves unwanted sexual advances or requests for sexual favors, and both verbal and physical conduct that creates a hostile or offensive work environment is covered. Some policies also cover accusations of mental anguish, emotional distress, humiliation and assault.
If your organization has a lot of interaction with the public, it is especially vulnerable to third-party claims like those described above. In some cases, insurers might not provide third-party coverage to firms with a high potential for claims; they might offer limited coverage instead, such as covering accusations of discrimination but not harassment claims. For more specific information on third-party coverage options, see Third Party Employment Practices Liability (EPL).
To protect your organization from third-party claims, you need to go beyond just purchasing coverage. You must implement policies and procedures that address discrimination and harassment issues, both for employee actions and the actions of third parties.
Insurers are increasingly requiring employers to implement these practices before issuing a policy.
Having policies in place will offer little help if employees aren’t adequately trained. New employee orientation programs should include a presentation outlining the organization’s harassment and discrimination policies and how to report and handle a third-party claim.
Hearing the information once is not enough to ensure compliance; employees must be retrained periodically through departmental meetings, and supervisors should receive copies of all policy updates and procedural changes to maintain training effectiveness.
One important caveat is that most policies don’t provide third-party coverage for accusations involving the Americans with Disabilities Act (ADA). Many policies define a claim narrowly as a “demand for monetary damages,” which can leave out ADA claims that seek reasonable accommodations rather than money.
Ensure your policy’s definition of a claim includes claims for non-monetary relief; a policy with this expanded definition will cover defense costs and indemnity connected with an ADA claim, though it will not fund changes needed to bring your organization into compliance with the law.
Frequently Asked Questions
What does third-party coverage protect against?
It protects the insured and employees from allegations of wrongful acts by non-employees, such as customers or vendors, including discrimination and harassment claims.
Does third-party coverage usually include harassment by customers?
Some policies include customer or vendor harassment, but coverage can be limited or excluded for employers with higher exposure, so check your policy terms.
Are ADA accommodation requests covered as third-party claims?
Often ADA claims are not covered if the policy defines a claim as a demand for monetary damages, so you should confirm whether non-monetary requests are included in your policy’s claim definition.
What practical steps reduce the risk of third-party claims?
Adopt clear harassment and discrimination policies, train employees and supervisors regularly, and document procedures for reporting and responding to third-party incidents.