An Introduction to Employment Practices Liability
Employment Practices Liability Insurance (EPLI) covers businesses against claims by workers that their legal rights as employees of the company have been violated. It is a type of liability insurance covering wrongful acts arising from the employment process. As a result, the typical type of claims covered under this policy include wrongful termination, discrimination, sexual harassment, and retaliation. Above all, the most prevalent type of claim currently are those for retaliation.
Additionally, EPLI policies cover claims from various other types of inappropriate conduct in the workplace, including, but not limited to, employment related defamation, invasion of privacy, failure to promote, deprivation of a career opportunities, and negligent evaluation. These policies also cover directors and officers, management personnel, and employees as insureds.
Importance of Employment Practices Insurance
The number of lawsuits filed by employees against their employers is on the rise. While most suits are filed against large corporations, no company is immune to such lawsuits. Recognizing that smaller companies now need this kind of protection, some insurance carriers provide this coverage as an endorsement to their Business Owners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other carriers offer EPLI as a stand-alone coverage. Also, EPLI is often available as part of a management liability package policy. In addition to providing directors and officers (D&O) and fiduciary liability insurance, management liability package policies offer the option to cover employment practices liability insurance (EPLI).
Features
EPLI provides protection against many kinds of employee lawsuits, including claims of:
- Sexual harassment
- Discrimination
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ / promote
- Wrongful discipline
- Deprivation of career opportunities
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
Common Exclusions
Common exclusions are for bodily injury, property damage, and intentional or dishonest acts. EPLI policies are underwritten on a claims-made basis. EPLI contain “shrinking limit” provisions, meaning that insurer payment of defense costs – which are often a substantial part of a claim – reduce the policy’s limits. This contrasts with Commercial General Liability (CGL) policies, in which defense is covered in addition to policy limits.
Cost of Employment Practices Liability
The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. As a result, the policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Also. liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.
