Wyatt Employment Law Report

Selecting Counsel Under EPLI Policies

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By Michael D. Hornback

hands helping 7175094MediumLitigation is stressful.  The anxiety normally first sets in with the service of the Complaint, even if you anticipated it was coming.  You scurry to talk with your employees who may be witnesses, you amass relevant documents from the personnel file, and you send out a litigation hold requesting that folks preserve all their emails related to the plaintiff.  Fingers crossed, right?

Normally, in conjunction with taking all of the steps noted above, you start thinking about which lawyer and/or firm you want to hire to represent the company.  You have relationships with several different lawyers who have worked with you in the past, some on corporate issues, some on non-employment corporate litigation, and then one or two that have helped you with those thorny day-to-day employee issues.  Your prior employer also had a good lawyer that might fit this case.  Which lawyers have experience dealing with these specific types of claims?  Do any of the lawyers have a good relationship with plaintiff’s counsel?  How well do they know the judge?  All important considerations when you are trying to decide on counsel.

You recently purchased Employment Practices Liability Insurance (“EPLI”), so you make a claim only to learn that you have no ability to select your own counsel.  Under the terms of the policy, the insurance company makes that call.  You are then told that the insurance company has retained a lawyer that is located nowhere near you and whom you have never heard of.  You get on that lawyers website and it looks like he has litigation experience, but very little employment litigation experience.

Your stress level has now risen to the point of paralyzing.

So, how do you ensure that you have some say in selecting your own, trusted lawyer to represent you through your EPLI policy?  The answer to that question depends on the type of EPLI policy you purchase and different steps you can take, preferably at the time you obtain the policy or at the time of renewal.

If your company does not have an EPLI policy, you might want to consider obtaining one.  At its basic level, it is insurance that helps protect employers from financial risks associated with various types of employee-related legal claims, including discrimination, wrongful discharge, harassment and a multitude of other types of claims.

While the specific terms of each EPLI policy can vary greatly between carriers, for the purpose of this article we will lump them into two types: a “duty to defend” policy and a “indemnification” policy.  In an “indemnification” policy, the insurance company is agreeing to indemnify the company for the specific types of risks insured.  Under this type of policy, the employer normally has the right to retain the counsel of its own choosing, but would have to incur the costs of the litigation up-front and later seek indemnification from the insurance carrier.

Conversely, in a “duty to defend” policy, the employer generally does not have the power to select counsel.  In this type of policy, the insurance carrier will immediately assume the defense of the lawsuit, would select counsel (normally from a list of law firm’s that have been pre-approved by the insurance carrier), and would pay the fees and expenses of that lawyer.

So back to the original question, how can the employer make sure it has the power to select counsel under an EPLI policy?  First, read the policy’s provisions on selection of counsel.  If the policy prohibits you, the insured, from selecting counsel, you can attempt to negotiate a separate agreement or specific endorsement to the policy which gives you the right to select counsel, or at least add your preferred law firm to the list of firm’s that would be considered by the insurance company.  In attempting to persuade the insurance carrier to your line of thinking, you can argue that your lawyer and/or law firm already know your business, they know your policies and procedures, they know the players involved, and they know the jurisdiction, locale, and judges most likely to be involved in your case.  All of those things equal a cost savings to the insurance carrier, as compared with lawyers who would have to spend time (i.e., billable time) getting their feet wet with you.   Those are always great selling points.

We strongly encourage you to speak with your insurance broker who has or will be placing the EPLI policy for your company.  The broker should be able to tell you exactly what the coverage calls for with regard to the selection of counsel.  Additionally, your insurance broker may have an internal contact at the insurance company with whom he/she can speak with about changing or amending the terms of the policy to allow the company to select its own counsel in the event of litigation.

Litigation is inevitably stressful, but one way you can diminish that stress is having your trusted lawyer by your side.

 

Leave a reply. Please note that although this blog may be helpful in informing clients and others who have an interest in information privacy and security, it is not intended to be legal advice. The information on this blog also should not be relied upon to form an attorney-client relationship.

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