Glossary

A wage and hour audit is an independent review (typically privileged) that seeks to determine whether, for payroll purposes, the employees of a business are properly classified as either "exempt" (and thus not eligible for overtime pay) or "nonexempt" (and thus eligible for overtime pay). Wage and hour audits apply the provisions of both the federal Fair Labor Standards Act (FLSA) and state wage and hour laws in making such determinations.

Wage and hour claims are assertions by an employee-plaintiff that their employer has failed to pay overtime wages owed to the employee. Within the past several years, a number of high-profile, high-dollar wage and hour claims have been filed on a class action basis, a fact that has vastly increased the dollar amount payable under such lawsuits. Given the magnitude of this exposure, most employment practices liability insurance (EPLI) policies specifically exclude coverage for wage and hour claims.

Wage and hour indemnity coverage refers to a type of insurance that covers indemnity costs (i.e., settlements and judgments) resulting from wage and hour claims. The two major categories of wage and hour claims are those alleging (1) failure to pay overtime (to "nonexempt" employees who are not exempt from, and thus eligible for, overtime pay) and (2) miscellaneous pay practices claims, which include but are not limited to misclassifying employees as independent contractors, failure to grant rest and meal breaks, and failure to pay wages when due. In addition to covering wage and hour indemnity costs, the policies can be written with options that cover (1) the defense of wage and hour claims and/or (2) standard employment-related perils, such as discrimination, wrongful termination, and harassment. One drawback associated with wage and hour indemnity coverage is that (depending on the insurer), such policies require per-claim self-insured retentions ranging from a low of $250,000 to $1 million. Since only large, financially strong businesses generally have the financial wherewithal to self-fund risks of this magnitude, only a handful of companies purchase wage and hour indemnity coverage.

A wage and hour insurance coverage endorsement is a coverage endorsement that may be attached to employment practices liability insurance policy forms. It covers the cost of defending claims alleging that an employer failed to pay overtime to a nonexempt employee—that is, an employee who is not exempt from, and therefore eligible to receive, overtime pay under the Fair Labor Standards Act (FLSA). No coverage typically applies under these endorsements to settlements or judgments (i.e., they cover only defense costs), and a sublimit (e.g., $100,000 to $500,000) usually applies.

A waiting period deductible is sometimes used in business interruption and other time element policies, in lieu of a dollar amount deductible. It establishes that the insurer is not responsible for loss suffered during a specified period (such as 72 hours) immediately following a direct damage loss. In disability income policies and under workers compensation statutes, a waiting period deductible is a deductible mechanism that establishes a period that must pass following an accident or illness causing disability before salary continuation benefits are payable.

Waiver is the intentional or voluntary surrender of a right, claim, or privilege.

A waiver of inventory is a fire insurance policy provision that states that inventory will not be required in the event of a small loss.

Waiver of premium is the known relinquishment by an insurer of the right to collect premium from an insured.

A waiver of recourse endorsement is an endorsement to a fiduciary liability insurance policy that prevents an insurer from exercising its subrogation rights against an insured fiduciary. Premiums for this endorsement are based on a charge per covered fiduciary. Unlike most other forms of insurance, under fiduciary liability policies, insurers sometimes exercise subrogation rights against insureds for non-willful or criminal acts. Insurers' rationale for subrogating against insureds is based on the fact that insureds should not be absolved of wrongdoing when the premiums for fiduciary liability coverage are paid from the assets of the employee pension and welfare plans the fiduciaries are charged with administering.

A waiver of subrogation is an acknowledgment by an insurer that it has no right to subrogate against a liable third party after it has paid a loss on behalf of its insured. Waivers of subrogation typically are agreed to by insurers as a response to the insured's having waived its own right of recovery against a third party. Generally, insurance policies do not bar coverage if an insured waives its right of recovery against a third party before a loss. However, coverage is excluded from many policies if subrogation is waived after a loss because to do so would violate the principle of indemnity. Parties in whose favor an insured has waived its right of recovery may want proof - in the form of a waiver of subrogation from the insurer - that the insured's coverage has not been negated by the waiver of recovery rights.