downsizing exclusion
An exclusion sometimes found within employment practices liability insurance
(EPLI) policies that precludes coverage for claims resulting from large-scale
layoffs within the insured organization. There are two rationales underlying
downsizing exclusions. The decision to terminate a significant portion of its
workforce is largely within an insured organization's control, and insurers
could be faced with catastrophic losses in the absence of the exclusion. Downsizing
exclusions are no longer common. Instead of excluding this exposure, as was
once standard practice, underwriters currently surcharge firms they perceive
as having a significant downsizing exposure. In other instances, underwriters
impose special, higher deductibles/retentions for downsizing claims.
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EPLiC Summer 2001