What Is a Wrap-Around Insurance Program?
Let me explain directly: a wrap-around insurance program is a policy that provides coverage for punitive damages in employment practices liability claims. If a court awards damages beyond just compensation to punish you as the defendant and prevent future misconduct, this insurance steps in to cover those costs.
Key Takeaways
- A wrap-around insurance program is a policy that provides punitive damages coverage for employment practices liability claims.
- It is also referred to as a wrap-around policy because it 'wraps around' an admitted Employment Practices Liability Insurance (EPLI) policy.
- EPLI protects employers from financial loss not protected by workers' compensation.
- The term wrap-around insurance can also appear in secondary or ancillary policies for health and life insurance and political risk insurance.
Understanding a Wrap-Around Insurance Program
You should know that a wrap-around insurance program is also called a wrap-around policy because it works alongside an Employment Practices Liability Insurance (EPLI) policy. EPLI covers claims from employees who say their rights were violated by you as the employer, including things like discrimination or wrongful termination.
In these lawsuits, the most common outcomes are punitive or monetary damages, which cover medical costs, lost income, pain and suffering, and more.
As an employer, you carry EPLI to handle potential legal costs if an employee sues. If they believe workers' compensation doesn't fully cover their loss—maybe due to what they see as your negligence—they might pursue punitive damages like for pain and suffering.
EPLI is there to cover what workers' compensation or general liability doesn't: it's a required insurance that offers some coverage for medical expenses and lost wages if an employee is injured, gets sick, or dies on the job.
Important note: Employment Practices Liability Insurance (EPLI) sets limits on payouts per employee, per injury, or per illness.
Types of Wrap-Around Insurance Programs
The term wrap-around insurance isn't limited to employer-employee situations. It also applies to secondary or ancillary policies for health and life insurance when a single policy doesn't meet your current or future needs.
Another type protects against political risk. If you're a company, you might get this to guard against financial losses from foreign government actions, covering things like deprivation, government acts, embargoes, sanctions, partial loss, and forced abandonment.
Special Considerations
Punitive cases are handled in civil courts. There's a defendant, but no prosecutor like in criminal cases.
The plaintiff seeks financial restitution and must hire their own attorney. In contrast, criminal defendants can get a state-provided lawyer if they can't afford one.
In civil cases, there's no jail time or criminal record involved. Usually, no jury either—most are decided by a judge alone.
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