The Importance of EPLI Insurance: Guarding Against Employee and Third-Party Claims

I'm sure you've talked with your broker extensively about the Big 4 lines of Commercial Insurance: General Liability, Property, Commercial Auto and Worker's Comp. Let's dive into Employment Practices Liability Insurance (EPLI): An equally important, but many times overlooked, line of insurance to protect your business.

EPLI typically covers a range of employment-related claims. From First-Party (employees) to Third-Party (vendors, customers, etc.) claims, the types of coverage provided under EPLI include:

1. Wrongful Termination

• Protection against claims from employees who allege they were terminated without proper cause or in violation of labor laws.

2. Discrimination

• Covers claims of discrimination based on race, gender, age, disability, religion, sexual orientation, or other protected characteristics under applicable employment laws.

3. Sexual Harassment

• Protects the company from claims of inappropriate behavior, including sexual advances, offensive remarks, or creating a hostile work environment.

4. Retaliation

• Covers claims made by employees who allege that they were punished or retaliated against for filing complaints about workplace issues (e.g., harassment or discrimination) or for whistleblowing.

5. Failure to Promote or Hire

• Protection from claims made by employees or applicants who allege that they were unfairly denied a promotion or hiring opportunity due to discrimination or other unlawful reasons.

6. Wage and Hour Violations (Limited)

• Some policies may offer limited coverage for claims related to improper compensation practices, such as unpaid overtime, wage discrepancies, or failure to comply with minimum wage laws. However, coverage in this area is often restricted.

7. Breach of Employment Contract

• Covers claims that the employer violated the terms of an employment contract, such as promises regarding job security, promotion, or compensation.

8. Negligent Evaluation

• Protects against claims that an employee was unfairly or negligently evaluated, leading to adverse job actions like demotion or denial of benefits.

9. Defamation or Invasion of Privacy

• Covers claims of defamation (slander or libel) or invasion of privacy by the employer, such as improper background checks or public disclosure of private employee information.

10. Emotional Distress and Mental Anguish

• Provides coverage for claims alleging emotional distress or mental anguish as a result of harassment, discrimination, or other unlawful workplace actions.

11. Workplace Harassment (Beyond Sexual Harassment)

• Covers claims involving non-sexual harassment, such as bullying, hostile work environments, or other forms of mistreatment.

12. Third-Party Coverage

• Protection against claims from third parties (non-employees), such as customers, vendors, or contractors, who allege harassment or discrimination by company employees.

Optional Coverages:

• Wage and Hour Defense Costs: Though often excluded or limited, some policies offer coverage for defense costs related to wage and hour disputes (like overtime or minimum wage violations).
• Class Action Suits: Protection from class-action lawsuits brought by multiple employees alleging discrimination, wage violations, or other employment issues.

Why it's necessary:

• Litigation Risk: Employment-related lawsuits are common and can be costly, even if the company is found not at fault. Legal fees alone can be substantial.
• Legal Compliance: Employment laws are complex and vary by jurisdiction, making it difficult for companies to always be in full compliance.
• Financial Protection: EPLI helps shield a company from the financial impact of defending against employment-related claims and paying settlements or judgments.

EPLI policies can be tailored based on the specific risks a company faces, and coverage can vary widely depending on the insurer and the policy.

Below are just a few recent employment-related lawsuits:

Employers Beware: Employees’ Personal Social Media Can Lead to Employer Liability:

https://www.t-mlaw.com/commentary/employers-beware-employees-personal-social-media-can-lead-to-employer-liability/#:~:text=The%20Ninth%20Circuit%20ruled%20that,that%20negatively%20impacts%20the%20workplace .

EEOC Files Three Sexual Harassment Lawsuits:

https://www.eeoc.gov/newsroom/eeoc-files-three-sexual-harassment-lawsuits

If you're interested in learning more about EPLI and/or if your business is adequately protected, please reach out: [email protected] .

Works Cited:

irmi.com

thehartford.com/employment-practices-insurance