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Canada needs different Employer Practice Liability (EPL) commercial insurance policies than U.S.: RIMS panel


September 16, 2009   by Canadian Underwriter


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The Canadian commercial marketplace requires standard policy wording for Employer Practice Liability (EPL) policies that are distinct from U.S. policies.
The Risk Management Counsel of Canada delivered a seminar, ‘Employer’s Dream: Insurer’s Nightmare! Employer’s Liability: The Need for a Canadian Model,’ at the RIMS Canada Conference in St. John’s, Newfoundland on Sept. 15.
EPL policies differ from Commercial General Liability (CGL) policies and Director & Officer (D&O) Liability policies, in that an EPL policy will cover “intentional incidents” such as harassment of one employee by another, explained panel member Genevieve Cotnam, partner at Stein Monast in Montreal.
Elizabeth J. Forster, panel member and a partner at Toronto’s Blaney McMurtry, said there is a breadth of issues dealing with EPL policies. These include the fact that “there are a huge number of different areas of liability that an employer can face and, secondly, we [Canadians] don’t have consistent policy language.”
Jorge Segovia, also a panel member and a partner at Cox and Palmer in St. John’s, noted two main differences between Canada and the United States that highlight the need for Canadian insurers to approach EPL coverage in a distinct manner.
First is the definition of wrongful dismissal in Canada and in the United States, he said. In the United States, a wrongful dismissal claim can arise if the termination involves some form of statutory breach such as discrimination.
In Canada, on the other hand, “wrongful dismissal is simply the fact that an employee that has been terminated has not been given reasonable notice or pay in lieu of notice, because our [employment] contracts, if it’s not built in, have an implied term requiring the reasonable notice or termination or payment in lieu of notice,” Segovia said.
“So, most Canadian EPL insurers will likely try to remove that coverage.”
The second distinction has to do with punitive damages, he said.
“A lot of EPL claims will involve claims for punitive damages. In the U.S., punitive damages are not covered by EPL policies because the size of the damages being awarded in the U.S. is quite high,” he said.
In contrast, in Canada, where the awards are quite modest, most insurers agree to cover the damage awards.
“It certainly would be useful over time to develop standard wording and clauses such as what we have for our CGL policies,” Segovia said.


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