Has the Business Case for Employment Practices Liability Insurance Been Undermined by the Effect of the Honda v. Keays Decision?

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Until very recently, the extent to which courts were willing to punish an employer for bad behaviour in the course of termination of an employee was relatively unknown. The spectre of significant punitive damages has led some employers to purchase employment practices liability ("EPL") insurance coverage, designed to provide protection against damages arising out of an employer's wrongful acts such as sexual harassment, discrimination and wrongful dismissal. However, the Supreme Court of Canada's recent decision in Honda Canada Inc. v. Keays, 2008 SCC 39, which significantly reduced the lower courts' damage awards, may have a chilling effect on the popularity and necessity of this type of insurance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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