Spotlight on Employment Practices Liability Insurance

What happens if you fire someone and they turn around and sue you for discrimination? Regardless of why you let them go, you are going to have to pay for your legal defense. Imagine if one of your employees harasses another. Your company could face settlements and legal fees, all because the offense took place on company property.  Scenarios like these are all too common and exactly why you need Employment Practices Liability Insurance (EPLI).

What is Employment Practices Liability Insurance (EPLI)?

Employment Practices Liability Insurance (EPLI) covers companies against claims or lawsuits filed by employees regarding their employment relationship with an employer. In other words, EPLI comes into play if an employee claims they suffered at your hands or those of another employee. EPLI might even cover you if a verdict if found against you in a court of law.

EPLI policies may also cover seasonal employees, leased employees, and independent contractors.

What Types of Claims Does EPLI Cover?

Depending on the exact wording of your EPLI policy, you might be covered for the following.

  • Discrimination (age, sex, race, religion, color, or national origin)
  • Sexual harassment
  • Wrongful termination
  • Emotional distress
  • Breach of contract
  • Violation of the Family Medical Leave Act (FMLA)

Some policies provide coverage for discrimination based on sexual orientation. Since this type of discrimination is not covered by Federal law, then policies may read differently depending on the state in which it is written.

They vary quite a bit, and some restrict EPLI to sexual harassment or business relationships.

What Type of Things Are NOT Covered by EPLI?

There are three types of coverage most companies need to protect their employees and themselves. These are Directors & Officers Insurance, Error & Omissions Insurance, and EPLI.

Employment Practices Liability Insurance does not cover the claims that would fall under the other policies.

Directors & Officers Insurance

D&O provides insurance for negligent acts, omissions, or misleading statements committed by directors and officers within the company.

Error & Omissions Insurance

E&O protects people who give advice, make educated recommendations, design solutions, or represent the needs of others.  First, it protects these people when they’ve done something they shouldn’t.  That is the ‘error’ part. Secondly, it protects them when they neglected to do something when they should have (omission). Some insurers refer to E&O as Professional Liability Insurance or Malpractice Insurance.

How Much Does EPLI Cost?

Several things affect the cost of EPLI.

  • Size of the company
  • The type of business
  • Number of employees
  • Where the business is located
  • Number of claims previously filed
  • How long the company has been in business

In addition to those factors, the cost will depend on whether the policy is based on occurrence or claims-made. One covers incidents that happen during the term of the policy, regardless of when the employee submits the claim. The other only covers claims made during the term of the policy.

© Copyright 2021. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented.

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