What Is a Wrap-Around Insurance Program?

A wrap-around insurance program is a policy that provides punitive damages coverage for employment practices liability claims. Should a legal recompense in excess of compensatory damages be awarded to a plaintiff to punish a defendant and deter them from committing future punitive actions, this form of insurance will help 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

A wrap-around insurance program is also referred to as a wrap-around policy because it is set up in conjunction with an Employment Practices Liability Insurance (EPLI) policy. EPLI insures against claims from employees that employers have violated their rights. Eligible claims for such lawsuits can range from any form of discrimination to wrongful termination.

The most common award from these types of lawsuits is punitive or monetary damages. These are usually issued to cover a range of needs, including medical costs, loss of income, and pain and suffering.

Employers carry EPLI policies to cover the costs they could incur in the event that legal action is pursued. If an employee feels that workers' compensation does not adequately cover their loss—perhaps because they feel their employer’s negligence caused their injury—they may decide to sue their employer for punitive damages such as pain and suffering.

EPLI addresses this risk and is designed to cover expenses not protected by workers' compensation or general liability insurance: a mainly mandatory form of insurance that provides some level of coverage for medical expenses and lost wages for employees or their beneficiaries when injured, falling sick, or killed as a result of their job.

Employment Practices Liability Insurance (EPLI) places limits on the amounts paid out per employee, per injury, or per illness.

Types of Wrap-Around Insurance Programs

There are other instances of the term wrap-around insurance being used that do not include employee versus employer interactions. These include secondary or ancillary insurance policies for health and life insurance coverages, when a singular policy does not meet current needs or is not estimated to meet future needs.

Another form of a wrap-around insurance program is also employed to protect against political risk. Companies may take out this type of policy to shield themselves in the event that a foreign government engages in activities that cause it a financial loss. Under this category of wrap-around insurance, protection is provided for deprivation, acts of government, embargo, sanction, partial loss, and forced abandonment.

Special Considerations

Punitive cases fall under the civil court’s jurisdiction. And while there is still a defendant, there is no prosecutor, as there is during a criminal case. 

The plaintiff is usually seeking restitution for a financial loss of some sort and must hire their own attorney to act on their behalf and provide counsel. Defendants in criminal cases, on the other hand, can request an attorney at a cost to the state if they cannot reasonably afford one.

Furthermore, with a civil case, there is no threat of jail time or a criminal conviction. There’s usually no jury, either—most civil cases are tried and decided solely in front of a judge.