What Employers Need to Know About Wage and Hour Indemnity Coverage

Employers: Do You Have Wage and Hour Indemnity Coverage?

Wage and hour indemnity and defense coverage provides liability protection for violations of federal and state employee compensation laws.

Young woman wearing protective eye wear and a hard hat, looking hopeful

Employers could be in for a surprise if they assume their Employment Practices Liability (EPL) insurance policy covers wage and hour claims.

Kimberly Lewis, vice president, professional lines insurance underwriter for Argo Insurance in Bermuda, says EPL policies usually exclude those claims.

“Some companies don’t know (wage and hour) coverage exists,” she says.

The Bermuda market offers the majority of wage and hour insurance products, Lewis explains. Argo Insurance launched its stand-alone wage and hour product in 2017 after recognizing an unmet need in the U.S. small to medium-size enterprise (SME) insurance market, and after an increase in wage and hour claims filed on behalf of U.S. employees.

What wage and hour liability covers

Wage and hour liability insurance covers indemnity and defense costs related to violations of the federal Fair Labor Standards Act, which established standards for minimum wage, overtime pay and child labor in the private and government sectors.

According to Lewis, the most common violations of the FLSA include:

  • Failure to pay overtime to nonexempt employees.
  • Misclassifying employees as either exempt or independent contractors.

Failure to comply with meal and rest break requirements.

Argo’s niche product for wage and hour indemnity and defense coverage

Through Bermuda and non-U.S.-domiciled brokers, Argo’s product offers a minimum self-insured retention of $500,000.

“Because we target a smaller employee headcount, our retentions are different,” Lewis says. “We are here to offer better retention options to the SMEs.”

As of October 2019, “the smallest employee head count for an Argo wage and hour policy has been 81,” Lewis says, adding that over 60% of submissions received have had at least one wage and hour claim.

Download our brochure to learn more about Argo Group’s Wage and Hour coverage and appetite.