This article was created in partnership with Tokio Marine HCC - Cyber and Professional Lines Group
In an industry where employment practices liability insurance (EPLI) was once an afterthought, Tokio Marine HCC – Cyber and Professional Lines Group (CPLG), a member of the Tokio Marine HCC group of companies based in Houston, Texas, has turned franchise risk management into a frontline priority. At the core of CPLG’s EPLI division are two long-standing leaders – Chris Murphy, senior vice president EPL and Lauren Wilke, director of underwriting EPL – whose combined 40 years of experience are shaping how EPLI is understood, sold and supported in the US insurance market. And that consistency has given the duo a rare vantage point to witness seismic industry shifts.
“When we first started, EPLI was a discretionary coverage,” Murphy told Insurance Business. “It was for high-paid lawyers and doctors, but now it’s almost commonplace. All businesses realize the need for EPLI, which provides coverage for claims arising from workplace issues such as wrongful termination, discrimination, harassment, and retaliation, whether it’s your small two-person owned and managed Jamba Juice or large corporation such as Facebook or Google. It runs the gamut.”
As Murphy explained, the size of a business isn’t a prerequisite for investing in EPLI – in fact, it may be more essential for smaller businesses to have this type of coverage. According to research from ARAG Legal Solutions Inc, seven out of 10 small businesses have dealt with at least one legal issue over the past three years - marking a 230% increase from 2015. What’s more, over half of small businesses say the legal issues they’ve faced have had either a moderate or large financial impact on their operations, with 73% adding that these issues have caused mental stress too. This emotional and reputational impact - especially for franchisees – can be devastating. Here Murphy outlined two reputational fronts.
“One, the worry is that once someone in the organization finds out there’s an EPL lawsuit, there’s concern about copycat lawsuits that could evolve into a class action lawsuit. That’s the internal reputational harm. Two, if a lawsuit hits the news, especially on social media, such as Yelp, we see external reputational harm may result. Businesses such as restaurants really suffer from this type of harm.”
And the digital magnification of bad press is relentless. As Wilke told IB, everybody's got a video camera in their pocket nowadays – and it’s something of a double-edged sword.
“We’re covering third-party claims as well as those from employees. It could be a situation where the employee... is videotaped… and all the comments are [then] circulating. That definitely [has] a big impact on the insurance – [beyond that] EPL claims are emotional for the insured. They often feel a connection to the employee, as if they went above and beyond to ensure their happiness and safety. So, when the employee sues them, it’s not just a slip and fall - it feels like a personal attack.
That emotional stake often leads to costly litigation. It’s about navigating that conversation, helping clients understand it’s not always in their best interest to let emotions get in the way by standing their ground and racking up thousands in defense costs. We work with employers to help them resolve these claims and move on to focus on their business.
This is where CPLG’s expert advice comes in perfectly. After all, they’re not new to franchise EPLI - they helped define it. As Murphy explained, his team started in the late '90s and franchise businesses were a main target for them then. As such, they created tailored forms and endorsements for the franchise business, leading the way where a lot of their competitors have followed. The differentiator with CPLG is their depth of experience and the support ecosystem, specifically their risk management service from ePlace Solutions, a tool called HR Pilot®.
“We've been using ePlace for 18 years now,” added Murphy. “They’re used to franchisee calls…and claims. We know what the calls are going to be and we know what the answers are going to be.”
Wilke elaborated: “HR Pilot® comes with every single policy at no additional cost to the policyholder. A lot of our competitors partner with law firms and maybe you get limited or a maximum amount of time with an attorney. We provide unlimited access to HR Pilot®, which is arguably more valuable because they’re providing guidance on how to manage people and specific situations within an organization, rather than just providing legal advice.”
And, whether it's workplace relationships, bullying accusations, or managing medical leave, HR Pilot® provides day-to-day support that prevents claims before they happen. With HR Pilot®, CPLG isn’t just handing over a legal playbook, they’re guiding clients on managing people and mitigating issues before they escalate.
And on the flip side, the claims process at CPLG is also built for high-volume, high-frequency environments - particularly among franchises.
“We just had a big insured renew. They send in 100 claims a year,” revealed Murphy. “Some carriers would freak out when they see that - but we encourage them to turn in these claims so we can get in there, handle them right away, get them settled and get them closed.”
And this approach is built around active partnership. As Wilke explained, some of their insureds that have been with them the longest have personal relationships with people at HR Pilot®.
“They also know the people on our claims team,” she explained. “[They] can talk to them when claims are coming in, getting immediate access to knowledge [on] what's happening in their organization. We really encourage that joint partnership between us to make sure that we’re all doing our best to keep the insured protected during a crisis.”
Despite the visibility, claims are rising. As Murphy told IB, frequency is up every year – some of it still driven by the #MeToo movement.
At the heart of the issue, for brokers advising franchise clients EPLI isn’t just about offering it - it’s about making sure the coverage fits the real risk.
“A lot of small franchise owners have EPLI as part of their BOP policy,” Murphy said. “But unfortunately, those are not complete policies. There are often sublimits, or they're endorsed onto a BOP and the limit for EPL is very small. [After all], sometimes it takes a couple of calls to a lawyer to help defend the claim and the sub-limit is exhausted. Just like the rest of the economy, the cost of claims has increased over the years, from the cost to defend to the average settlement payment. So, a $50,000 or $100,000 sub-limit in a BOP is just not sufficient anymore.”
To avoid pitfalls here, Murphy urged brokers to dig deeper. “The first thing to ask a new franchise client is: ‘Can I see a copy of your EPLI policy?’ Is it just an endorsement? What are the limits? Does it include any risk management tools?”
He was direct about HR Pilot®, adding that “CPLG’s risk management tool can become a valuable partner and provide HR advice.”
Wilke agreed, adding that their coverage is all-encompassing - something that’s a necessity, no longer a ‘nice to have’ in this environment.
“We try to help the insureds be proactive. We ask about their HR policies and procedures, and if they don’t have them, we connect them with HR Pilot® to put all of that in place.”
