Breweries and Liability Insurance — Why Do They Need it?

Breweries and Liability Insurance — Why Do They Need it?

By David DeMoss

The internet and social media have allowed us to spread news and awareness faster than ever; however, that can be good and bad. In relation to breweries, there has been quite a lot of attention recently with unhappy employees, who have not been shy about voicing their issues. Most of the claims against breweries involve either sexual harassment or racial discrimination. Regardless of what the allegation is, it can seriously hurt a brewery’s reputation, which is why it’s important to take precautions to prevent it from happening.

Proactive risk management measures should be the first action taken. This includes creating and distributing employee handbooks that discuss company workplace policies and procedures, conducting periodic performance evaluations, having an “open door” policy, documenting any infractions of the company’s policies and procedures, etc. In addition, having EPLI insurance in place can help — this type of insurance covers an employer when they are defending themselves against claims of unfair or illegal employment practices by an employee or former employee. With regards to breweries, having third-party EPLI insurance may also be beneficial, as it provides coverage for allegations of harassment, discrimination, and other issues that result from an employer or employee interacting with the public. When it comes to protecting your business, implementing these steps will help diffuse any unpleasant situations that may arise. More from Paul Martinez below.

As social media and craft brewing both mature, they are creating a high-octane concoction that highlights some less-than-savory employment experiences at a few breweries. Several discrimination allegations and lawsuits have made headlines recently, with social media playing a supporting role in publicizing them and damaging breweries’ reputations. As this industry grows — and the #MeToo movement highlights allegations of discrimination and harassment across all industries — breweries will continue to grapple with these issues. That’s where employment practices liability insurance comes in.

What’s happening at breweries?

Last year, a Boston brewery was taken to task in an online forum for payment practices that many believed were unfair. Though no lawsuit was involved, the brewery eventually raised employees’ hourly wages significantly after a barrage of criticism.

In another case, a brewery was sued by a former employee for sexual harassment after a string of questionable behaviors exhibited by the owner. The last straw for her was when the owner insisted on booking shared accommodations for the brewery staff at a large beer festival.

Recently, a Michigan-based brewery was in the news as it settled a racial discrimination suit brought by its former Detroit taproom events manager, who alleged retaliation and discrimination in his firing. As the case was being settled, an unflattering deposition from a former manager was leaked. Soon after, the company’s newly hired diversity and inclusion director very publicly resigned. Restaurants and bars stopped selling the brand’s beer and the company temporarily closed the Detroit taproom.

Allegations from employees — past or present — can come from a variety of angles. Most claims against breweries involve sexual harassment, but some involve allegations of racial discrimination as well. Both can result in ugly fights that damage a brewery’s reputation. Breweries would do well to prepare, and agents play a key role in helping them do so.

What does EPLI insurance do for breweries?

EPLI covers an employer when they are defending themselves against claims of unfair or illegal employment practices or acts by an employee or former employee, such as breach of contract, wrongful termination and discrimination. Even if an employer is not found responsible for such allegations, they must still pay the costs of their legal defense. That can be significant, as many of these cases lack physical evidence and can turn into contentious and expensive litigation.

For breweries with taprooms or brewpubs — where employees are in regular contact with the public — another important consideration is third-party EPLI coverage. It provides coverage for allegations of harassment, discrimination and other issues that result from interacting with the public. For example, it can provide defense and settlement coverage when a customer or vendor harasses or discriminates against an employee while performing work duties. It can also cover the employee if an employee harasses or discriminates against a customer or vendor as part of the business.

Risk management for insureds

We know breweries can’t depend on EPLI coverage alone to protect themselves. These cases highlight the need to incorporate a strong, management-supported employment practices policy. Below are some employment practices breweries can implement (at minimum) to help prevent lawsuits:

  1. Create and distribute an employee handbook detailing company workplace policies and procedures, including an employment-at-will statement and equal employment opportunity statement.
  2. Post written job descriptions for each position, identifying responsibilities.
  3. Conduct and document periodic performance evaluations.
  4. Pre-screen potential candidates before the interview process.
  5. Use an employment application that contains an equal employment opportunity statement and “at-will” wording. Do not include any questions that can be used to identify a candidate’s age to avoid age discrimination claims. Implement zero-tolerance policies against discrimination, substance abuse and any type of harassment.
  6. Conduct background checks on all possible candidates.
  7. Provide an “open door” policy in which employees can report infractions without fear of retribution.
  8. Document any infractions of your policies and procedures, including third-party incidents. These records are valuable in the event of a suit.
  9. Establish a policy for communication with the press driven by a public relations contact to which any inquiry can be referred.

Furthermore, background checks and even reviews of candidates’ social media presence can assist in hiring people who align with a business’s philosophy and support a culture of diversity and inclusion.

How agents & brokers can help 

In addition to suggesting strong policies and procedures around employment practices, agents and brokers can encourage breweries to consider EPLI coverage as they expand. Though some breweries are proactive about seeking EPLI coverage, many do not consider it until they face allegations of unfair employment practices. Yet if insureds fail to report a potential problem and it results in a claim, the insurer can refuse to cover that claim.

To avoid such problems, it is especially important for agents to help insureds understand retroactive dates. Typically, when an insurer writes a new EPLI policy, the retroactive date is the date of the policy. As the agent, you can explain these coverage nuances — otherwise, you can end up in hot water and the client can end up without coverage.

When researching an EPLI policy for a brewery client, look for a few features:

  • Coverage of a full range of perils, including harassment, discrimination, unfair hiring practices, failure to promote, wrongful termination, employment-related disputes and wage and hour.
  • Separate limits for defense and settlement. A million-dollar limit is the most common coverage level and it is preferable that defense costs are covered separately so as to avoid eroding your limit of liability.
  • Third-party EPLI coverage. Not all EPLI policies include this as standard.

Some insurers offer basic EPLI coverage as part of a package policy for breweries. However, monoline coverage is more likely to offer separate limits for defense, cover additional perils and include third-party EPLI coverage.

Hiring practices can play a big part in finding the right people to create a harmonious work environment. But for your brewery clients, an EPLI policy is there to protect them if these policies and procedures fail to prevent allegations of discrimination or harassment. As agents and brokers look for opportunities to serve the alcoholic beverages industries, EPLI coverage is something to keep in mind.

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