What every employer should know about Employment Practices Liability insurance.

Employment Practices Liability Insurance (EPLI)

What is EPLI?

EPLI is a kind of liability insurance covering wrongful acts arising from the employment process. It provides protection against claims made by employees, former employees, or potential employees. EPLI protects employers from claims made by workers who have sued them for violating their legal rights as employees. Standard liability insurance policies do not provide adequate coverage for employment-related risks.

Why would a business need EPLI? 

Employment allegations are a common form of business-related claims. The high cost of lawsuits due to growing number of job-related lawsuits have created the need for employers to financially protect their businesses and the general liability coverage on their business insurance policy does not protect against employee related lawsuits.

When would a business need EPLI?

EPLI is needed as soon a business starts to hire employees. Most investors and directors will require that a business or company carry EPLI coverage as part of the Directors and Officers Liability Insurance since they can also be held liable in suits relating to employment practices.

What does EPLI cover?

EPLI could include discrimination (age, sex, race, disability, etc.), wrongful termination, sexual harassment, breach of contract, hostile working environment, and lack of advancement and mismanagement of benefit plans. Additional causes can include libel, slander, or other defamation, invasion of privacy, mental anguish, infliction of emotional distress, loss of consortium, assault, battery, negligent hiring, supervision, promotion or retention in connection with any other employment-related claim, can often be covered.

How does EPLI coverage work?

Most EPLI policies operate on a claims-made basis. This means that policyholders can only receive benefits if they are covered both at the time of the incident and at the time when the claim is filed. However there are two other types of EPLI policies. An Occurrence policy which obligates the carrier to pay for claims arising out of occurrences during the policy period, regardless of when the claim is reported. And a Claims-Made policy which protects an insured against claims that are reported while the policy is in force. Most policies start at 1 and go as high as 25 million dollars. Additionally most EPLI policies include a deductible. EPLI can be written either on a stand-alone basis or as a rider for all of the common employer’s policies, including directors and officers, employers liability, and comprehensive general liability.

What doesn’t EPLI cover?

EPLI policies generally exclude coverage for: Occupational Safety and Health Act (OSHA) violations,  Fair Labor Standards Act violations, State Employment Law violations, Consolidated Omnibus Budget Reconciliation Act (COBRA) violations, Employee Retirement Income Security Act (ERISA) violations, Certain Americans With Disabilities Act Claims, Intentional Institutional Claims (such as retaliating against a whistle blower), and punitive damages.

What are some steps an employer can do to protect their business from a lawsuit?

An employer should be diligent in documenting every transaction and what steps were taken to resolve all issues. Additionally protocol should be in place for employees. Establish clear hiring guidelines and finally, make sure all employees know what to do if they are sexual harassed or discriminated against by a supervisor.

What is the cost of EPLI insurance?

Typically the cost of an EPLI policy is contingent on the location, type, size, and number of employees as well as previous lawsuits and the length of time a company has been in business.  However, other factors can affect the cost.

Lawsuits filed by employees against businesses have been on the rise and no employer is immune to such lawsuits; so whether a large company or a small business, Employment Practices Liability Insurance (EPLI) is a valuable investment.