I was working onsite at a client’s office. I made a joke in the breakroom. A client employee filed a complaint with their HR, accusing me of harassment. The client terminated my contract immediately and is threatening to sue me for creating a “Hostile Work Environment.”
Key Takeaways
- GL & E&O Exclusion: Neither General Liability nor Professional Liability covers harassment, discrimination, or wrongful termination claims.
- EPLI is needed: You need Employment Practices Liability Insurance (EPLI). Usually, this covers you harassing your own employees, but “Third Party EPLI” covers you harassing others (clients).
- Defense Costs: Even if the joke was innocent, defending a harassment suit costs $50k+. EPLI pays this.
- Contract Termination: Insurance won’t pay for the lost contract value, but it pays the legal settlement.
The “Why”: The Employment-Related Practices Exclusion
The Trap:
Check your GL policy exclusions.
“Employment-Related Practices Exclusion”: “We do not cover bodily injury or personal injury arising out of… harassment, coercion, discrimination…”
You are naked without specific EPLI coverage endorsed for “Third Party Liability.”
The Investigation: I Quoted 3 Major Carriers
1. Chubb
- My Analysis: Chubb offers excellent EPLI with “Third Party” coverage standard. This protects you if a client sues you for harassment.
2. Travelers
- My Analysis: You can add EPLI to your BOP. Ensure you check the box for “Third Party.” If you only buy “First Party,” it only covers your own staff suing you, not the client.
3. Hiscox
- My Analysis: They offer standalone EPLI for small businesses. It’s affordable ($500/yr). Essential if you work onsite.
[IMAGE: Checklist showing “First Party” vs “Third Party” EPLI coverage]
Comparison Table: Harassment Liability
| Carrier | Third Party EPLI? | Defense Limits | Cost | Best For… |
| Chubb | Yes | High | | Onsite Consultants |
| Travelers | Endorsement | Medium | | Small Biz |
| Hiscox | Standalone | Varies | $ | Freelancers |
Step-by-Step Action Plan
- Silence: Do not email the client “explaining” the joke. It will be used against you.
- Notify Carrier: Report an EPLI claim immediately.
- Check “Third Party” Clause: Verify your EPLI covers non-employees.
- Hire Counsel: Use the insurance lawyer. Harassment law is complex.
FAQ
I’m a solo freelancer. Do I need EPLI?
Yes, if you interact with clients. Third Party EPLI is for you getting sued by them.
Does this cover sexual harassment?
Yes, that is the primary purpose of EPLI.
Can they sue me personally?
Yes. Harassment is often a personal tort. Insurance defends you personally.