Ambulatory Surgery Centers (ASC) and Managed Services Organizations (MSO) operate in complex healthcare environments where staff interact frequently with patients, vendors and other external parties. These interactions, combined with internal employment practices, create a wide range of liability exposures. One essential but often overlooked safeguard is employment practices liability insurance (EPLI), particularly the inclusion of third-party coverage, which protects against claims made by nonemployees.

What Is EPLI?

EPLI protects organizations against employment-related claims such as:

• Discrimination (based on race, gender, age, disability, etc.)
• Harassment
• Wrongful termination
• Retaliation (e.g., punishing an employee for reporting misconduct)
• Discriminatory hiring decisions (e.g., rejecting a qualified candidate based on protected characteristics)

While standard EPLI policies cover claims from employees, third-party EPLI coverage extends protection to claims made by nonemployees—such as patients, vendors or contractors—who allege misconduct by the organization’s staff.

Why Third-Party Coverage Matters

ASCs and MSOs frequently operate in settings where staff are in close contact with individuals outside the organization. This creates exposure beyond traditional employee claims. Without third-party coverage, these organizations may face significant financial and reputational risk from lawsuits that fall outside the scope of standard EPLI.

Hypothetical Scenarios

1. Vendor Harassment Claim: A medical device representative alleges that an MSO-employed nurse made repeated inappropriate comments during visits to a facility. The vendor files a harassment claim. Without third-party EPLI coverage, the MSO may be left unprotected.
2. Patient Discrimination Allegation: A patient claims they were treated unfairly due to their ethnicity by an ASC-employed front desk staff member. Even though the patient is not an employee, the organization could face legal action. Third-party EPLI coverage would help defend and potentially settle such a claim.
3. Retaliation Claim: An ASC employee reports unsafe working conditions and is subsequently demoted. The employee files a retaliation claim, which is covered under EPLI.
4. Discriminatory Hiring Decision: A qualified job applicant alleges they were denied employment due to their age. EPLI can help defend the organization against such claims, even if the individual was never hired.

Caution When Using PEOs

Professional Employer Organizations (PEO) are often used by ASCs and MSOs to outsource HR functions and obtain EPLI coverage. However, PEO-provided EPLI policies frequently exclude third-party coverage or limit it significantly. It is essential for ASC and MSO leaders to:

• Review the EPLI policy in detail before relying on PEO coverage.
• Confirm inclusion of third-party coverage and understand its scope.
• Consult with a specialized insurance broker who understands healthcare-specific risks.

Final Thoughts

Third-party EPLI coverage is a critical layer of protection for ASCs and MSOs. As employment practices and external interactions grow more complex, so do the risks. Ensuring comprehensive EPLI protection, including coverage for retaliation, discriminatory hiring and third-party claims, is a proactive step toward safeguarding your organization’s financial health and reputation.

For more information on securing third-party coverage, please call Ed Foley at 800.475.0991 ext. 3603 or Randy Gowdy at 800.475.0991 ext. 3601.

Ed Foley is the senior vice president of Risk and Insurance Division at Summit Financial Group and can be reached at efoley@yoursummit.com. Randy Gowdy is the president of Risk and Insurance Division at Summit Financial Group and can be reached at rgowdy@yoursummit.com. The Summit Financial Group website is www.yoursummit.com