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breach of an employment contract

A type of claim in which an employee alleges that an employer has breached the terms of an agreement governing the terms of employment, of which there are two basic types: (1) a written employment contract and (2) an implied contract of employment.

Virtually no employment practices liability insurance (EPLI) policies cover indemnity payments (i.e., settlements and judgments) involving breach of a written employment contract, and only a handful cover the defense costs pertaining to such claims.

EPLI policies do, however, cover both the defense and indemnity costs generated by claims alleging breach of an implied contract of employment. Such claims typically state that an implied contract of employment was established by a letter offering employment, language appearing in an employee handbook, or statements made by a manager/supervisor or as a result of an employee's tenure with a company.


Links for IRMI Online Subscribers Only: PLI XXI.B, XXI.E; PracRisk, Topic G-36

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