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What Is Employment Practices Third Party Liability Coverage?

An emerging area of risk for business owners and non-profit organizations is wrongful discrimination and harassment against their own clients and visitors. In some states, like New Jersey, laws are enacted that provide protection to individuals from discriminatory practices.

This area of emerging risk is called third party liability. The third party is someone who is a customer or visitor of a business or non-profit.  For example, a driver for UPS who drops off packages to your company could be considered a visitor to the business.

Discrimination and harassment are two separate matters.

Harassment deals with some form of aggressive pressure or intimidation like sexual harassment that is either unwanted or uncalled for. For example, a female UPS driver is sexually harassed by a male office manager every time she delivers a package to an office. 

Wrongful discrimination deals with unjust or prejudicial treatment of different categories of people within a protected status. Wrongful discrimination laws have defined categories of individuals.  For example, there are laws that protect people based on their race.  However, there are no laws that protect people based on their favorite football team.

When it comes to discrimination New Jersey has a law called NJ Law Against Discrimination (NJ LAD). The law is quite broad in its approach to discrimination and harassment when it comes to employment law compared to similar federal laws.

It governs discrimination in the following areas:

  1. Credit & Business Transactions
  2. Employment
  3. Housing
  4. Public Accommodation

This article is going to focus on discrimination under “Business Transactions.”

The law prevents discrimination against a person who a business decides to refuse to serve based on any one of the following:

  1. Race
  2. Creed (Religion)
  3. Color
  4. National Origin
  5. Nationality
  6. Ancestry
  7. Marital Status
  8. Domestic Partnership or Civil Union Status
  9. Military Service
  10. Age
  11. Sex
  12. Affectional or Sexual Orientation
  13. Gender Identity or Express
  14. Disability

Bringing a lawsuit against an organization is very simple under the NJ LAD. In fact, for general employment practices, lawsuits are easier to bring against a company as opposed to going through the EEOC.  But that is a story for a future date to discuss.

New Jersey based businesses and non-profit organizations are not left bare to a lawsuit under NJ LAD if they carry Employment Practices Liability (EPLI) that includes third party liability coverage.

As mentioned above third party liability deals with discrimination and harassment. A standard EPLI policy does not include third party liability.  It must be endorsed to the policy.

Good EPLI policies will include a broad definition of third party liability coverage that will include harassment and discrimination. However, buyer beware that some insurance carriers will say they provide third party liability coverage but only limit it to either harassment or discrimination.

Also special attention needs to be made that third party liability coverage applies to claims from “Natural” people or individuals. Most of these lawsuits are going to come from individuals.  I have seen some insurance carriers say they will provide third party coverage but only from a vendor of the company. 

If you are looking for third party liability coverage, underwriters will want to know if your company or organization has written policies outlining employee conduct when dealing with customers, clients, or other third parties. Also, you will be asked if you have written policies or procedures dealing with complaints from customers, clients, or other third parties for issues involving harassment or discrimination.

If you don’t have these kind of policies and procedures in place, underwriters may be unwilling to provide coverage.

Check out this link to read more about the New Jersey Law Against Discrimination.

Scott Harrigan

About Scott Harrigan

Scott started his career in insurance in 1988 and joined Rue Insurance in 2004 as a Marketing Specialist focusing on creating effective risk financing and risk transfer programs for companies and non-profit organizations. In addition to this he is a member of the Rue Insurance educational team that provides ongoing professional development in critical insurance concepts and programs to Rue employees. About Scott | More Posts by Scott