Covered by EPLI? Better Think Again

September 30, 2011

Many employers purchase an insurance product known as Employers Practices Liability Insurance (EPLI) for coverage in the event they are sued for different types of employment claims such as harassment, discrimination and retaliation.  One such employer, Cracker Barrel, had an EPLI policy with Cincinnati Insurance Company.  Cracker Barrel was sued by the EEOC for sexual and racial harassment, racial discrimination, retaliation and discharge.  Ultimately, the suit was settled for $2,000,000 plus $700,000 in attorneys’ fees.  There was no question but that the allegations made in the suit were of the type covered under the policy.  Then why did the insurance company deny the claim?

Cincinnati Insurance Company stated that it properly denied coverage because the lawsuit did not fall under the definition of a “covered claim.”  The policy in question defined such a claim as:

“a civil, administrative, or arbitration proceeding commenced by the service of a complaint or charge, which is brought by any past, present or prospective employees.”

Since the lawsuit against Cracker Barrel was brought by the EEOC and not employees, the company wasn’t covered.  In the end, a federal district court in Tennessee agreed.  Cracker Barrel Old Country Store, Inc. v. Cincinnati Insurance Co., 3:07-cv-00303 (M.D. TN 8/11/11)


While it is likely that this will be appealed to the 6th Circuit Court of Appeals, the prudent employer with EPLI insurance should check the language of its policy and contact its insurance agent/ broker to make sure that it is covered for any charges or lawsuits brought by the government on behalf of employees.