Employment practices liability coverage, aka “EPLI”, or EPL, is a type of management liability that is important for any employer, because it protects against claims arising from the employer-employee relationship…
What Is Employment Practices Liability Coverage?
Employment practices liability coverage protects your business from claims made during the policy period due to incidents that arise during the hiring process, employment and separation or termination with an employee.Â
If your business has at least one employee, EPLI provides you with protection against employee claims such as retaliation, wrongful termination, discrimination based on age, racial, religious or ethnic grounds, sexual harassment (#metoo) or other workplace-related harassment, failure to promote or hire, and other employment related claims.
EPLI insurance provides coverage for employment related claims in two primary ways:
- Defense Costs: EPL coverage helps pay for legal and defense costs and may provide additional legal services prior to an incident becoming a claim or escalating to a lawsuit.
- Settlements and/or Judgments: EPLI pays for legal settlements and/or judgments if needed.
EPLI claims can be costly because they can be complex, time consuming and difficult to defend…Â
As described below, the cost of EPLI insurance is considered “worth it” when you compare the relative low cost of an insurance premium against the time, cost and administrative burden of a legitimate employment related practices claim, a bad actor or a problem employee.
What Does Employment Practices Liability Insurance Cost?
Employment practices liability coverage cost is determined by many factors, including – but not limited to – the factors below:
- Size of your company in terms of revenue
- Number of employees at your company
- Your history of any claims
- Employee hiring and workplace employment practices
- Geographic location
- Industry
Small businesses will pay less than larger businesses for EPLI because their exposure is smaller and the likelihood of a claim may be less with fewer employees on staff.
However, small to medium sized businesses may still experience a costly and disruptive claim…Â
This is because SMBs do not have a full time human resources department, or a legal team on staff, along with the employment infrastructure needed to handle a legitimate claim or a problem employee.
Is EPLI Insurance Worth It?
According to Hiscox, a business insurance company, the average employee lawsuit costs employers $160,000, including the cost of defense and settlement.
Whereas the cost of employment practices liability coverage is a tiny fraction of this amount…
It is best for employers seeking EPLI to act now.
Since the COVID-19 pandemic, the market for employment practices liability coverage has hardened considerably because of a higher frequency and severity of claims.
The EEOC reports vaccine-related claims as well as discrimination claims related to WFH/remote work policies and return to work requirements.
You could even be the target of a lawsuit by employees outside your firm if a complaint is made by a third party against someone who works for you.
As an employer, it also pays to familiarize yourself with the laws that EPLI claims are often brought under, including:
- The Civil Rights Acts of 1964
- The Civil Rights Act of 1991
- The Age Discrimination in Employment Act
- The Americans with Disabilities Act (ADA)
- The Family and Medical Leave Act (FMLA)
You should aim to tap into the potential of every employee, however, you need to have systems in place to avoid hiring a problem employee, dealing with problems that arise in the workplace.
If a problem does arise, have a process in place for safely and legally addressing the situation or terminating employees who can’t or won’t improve.
Unfortunately, your company can do everything right, but still be the target of an employee complaint that results in a lawsuit and the required legal defense.
If you have questions about employment practices liability insurance for your business, or how to save money by packaging EPLI with directors and officers and other insurance in a management liability policy, please feel free to schedule an appointment with me at the link below.
