Vaccine Mandates: Fraught With Exposures and Liabilities

By Alex Maza, National Management Liability Practice, National Account Director

Vaccine Mandates: Fraught With Exposures and Liabilities

Full FDA approval of the Pfizer vaccine spurred many companies to begin mandating vaccines for their employees. This decision is complex and fraught with exposures and liabilities. United Airlines has recently been sued over its vaccine mandate, from employees claiming the airline has not accommodated religious or medical exemptions. Companies that decide not to mandate vaccines, however, are just as likely to face litigation.

In early September, President Joe Biden signed an executive order requiring vaccinations for all federal employees and health care workers. In addition, Mr. Biden announced that he has directed the Occupational Safety and Health Administration (OSHA) to draft a new emergency rule requiring all businesses with 100 employees or more to mandate vaccination for their employees or require weekly testing. If companies fail to comply, they will be fined. This decision has already received pushback, including some questioning its legality and enforceability, but should it be formally adopted by OSHA in a few weeks, it will affect 80 million Americans.

This is a rapidly evolving situation with no “best practices” road map and more questions than answers. The one thing experts can agree on is that vaccine mandates and the related executive order will lead to significant increases in litigation, potentially exposing businesses to claims from employees and –quite possibly - customers.

OSHA Emergency Rule Considerations

If the OSHA emergency rule is adopted and companies have to mandate employee vaccinations and testing, there is a significant cost burden placed on companies, many of whom likely did not budget for enforcing these mandates. This raises the question: who is footing the bill? Will the federal government provide financial support so that companies can more easily comply?

In addition, knowing an uptick in mandate-spurred claims is inevitable, will the federal government also provide a legal backstop to support companies’ looming legal fees? This may help incentivize widespread compliance.

The Choice To Mandate May Be A Business Survival Necessity

For some industries, those requiring in-person work, mandating vaccines could be crucial to survival. Retail, health care, hospitality, and manufacturing businesses all took an enormous financial and operational hit during last year’s forced shut downs, causing revenue losses that can take years to recover from.

Regardless of industry, businesses moving forward with vaccine mandates need to make sure they’re taking every precaution and covering all of their bases. Exemptions need to be offered that comply with the Americans With Disabilities Act and honor religious beliefs. At no point can the mandates be, or appear, discriminatory. Consult legal counsel if available when your developing vaccine mandate protocols.

The Choice Not To Mandate: Proceed With Caution and Precautions

Even if the OSHA rule is adopted, not all businesses will choose to mandate vaccinations or even strongly encourage them. This choice also exposes businesses to lawsuits from employees who feel the work environment is unsafe, even hostile. To protect against litigation, companies must be able to prove they’ve taken every precaution to mitigate the spread of COVID-19 in the workplace. Precautions can include sanitizing offices, social distancing, proper ventilation, and mask mandates.

Management Liability Coverage Implications

Increased litigation from vaccine mandates will heavily impact Employment Practices Liability Insurance (EPLI) coverage, which protects against claims by workers that their legal rights as employees have been violated. It will also affect Directors & Officers (D&O) coverage, in instances where executives are sued by clients, customers, or employees for negligence and company mismanagement due to their mandate-related decisions.

How Will Carriers React?

  • Questionnaires: As vaccine mandate-related EPLI and D&O claims begin to roll in, carriers will begin asking very specific questions about companies’ procedures and policies to determine whether employers were discriminatory or creating an unsafe work environment. We have already seen this come to fruition. Select carriers have started asking insureds to complete supplemental questionnaires on COVID-19 policies, and business procedures in regards to vaccine protocols and safe working environments. These questionnaires will likely become standard before carriers write a new policy or renew one to gauge whether insureds are at risk of being a litigation target.
  • EPLI Cost Increases: We are already in a hard market for EPLI insurance, and vaccine mandates will likely add to this trend. If they see significant litigation increases, carriers will protect profits by increasing retentions, deductibles, or pricing to the point where purchasing EPLI coverage could become cost-prohibitive.
  • Non-Renewals, Exclusions, Sub-Limits: Depending on litigation outcomes, carriers may stop offering EPLI coverage, or just not offer it in certain high-risk industries such as health care, retail, manufacturing, or hospitality. They may also institute vaccine and pandemic-related exclusions and sub-limits.
  • Competitive leniency: As there are still many carriers in the management liability space, we may see some be more willing and lenient in writing EPLI and D&O policies in order to gain market share. The degree of their leniency will depend on the size of the claims and payouts.

In coming months, any uptick trend in claims related to vaccine mandates should inform the likely long-term effect on carriers and the market. No matter what business leaders decide, they need to make sure that they are doing everything they can to cover their bases, protect their employees, and shield themselves from potential litigation.

We will be watching closely and will update you here on the Knowledge Center as we learn more about how this developing issue will impact coverage and rates. For expert consultation on how your business should proceed, reach out below.


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The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.