Does the Employment Practices Liability insurance for a Cream franchise need to name the franchisor as a co-defendant?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Workers’ Compensation | Statutory minimum coverage amounts, with employer liability minimum limit of $1,000,000. |
|---|---|
| Umbrella Liability | Not less than $3,000,000 to be in excess of Commercial General Liability, Auto Liability, and Employer’s Liability. |
| Trade Name Restoration/Food Borne Illness | $1,000,000 to cover lost profits due to any alleged or actual contamination, supplier contamination, inoculations, and testing. Coverage must also include crisis management expense coverage. |
| Employment Practices Liability | $1,000,000 limit for coverage of any wrongful employment action and third-party coverage for harassment and discrimination of non-employees. Coverage must name us as co- defendant. |
Source: Item 9 — FRANCHISEE'S OBLIGATIONS (FDD pages 24–27)
What This Means (2025 FDD)
According to the 2025 FDD, Cream franchisees are required to obtain Employment Practices Liability insurance with a $1,000,000 limit. This insurance must cover any wrongful employment action and third-party coverage for harassment and discrimination of non-employees.
A key requirement is that the insurance policy must name Cream as a co-defendant. This means that in the event of a claim related to employment practices, the franchisor, Cream, would be included in the lawsuit or legal action alongside the franchisee.
This requirement protects Cream by allowing them to be directly involved in the defense of any employment-related claims, ensuring they can protect their brand and reputation. For the franchisee, this means they must ensure their insurance policy specifically includes Cream as a co-defendant, which may affect the policy's cost and terms. Franchisees should discuss this requirement with their insurance provider to ensure compliance and understand the implications of this clause.