Employment Practices Liability Insurance (EPLI) is a type of professional liability insurance that protects businesses from financial losses related to employee claims of workplace misconduct, such as wrongful termination, discrimination, harassment, or retaliation. It covers legal costs, settlements, and judgments arising from employment-related lawsuits.
Who needs Employment Practices Liability Insurance (EPLI)?
Employment practices liability coverage, also called EPL insurance or EPLI, is essential for companies of all sizes, from small businesses to large corporations, as it protects against employment practice claims related to workplace misconduct. EPLI ensures that companies have the financial protection needed to manage risk and cover their legal expenses should a claim arise. The Equal Employment Opportunity Commission (EEOC) shows that claims are on the rise, so EPLI coverage is necessary to mitigate risk to your business.
How does EPLI benefit employers?
Employment practice claims, such as wrongful termination or harassment, can harm your business both financially and reputationally. They’re also time-consuming to manage. EPLI provides a safety net by covering legal defense costs, settlements, and judgments. It also helps employers maintain their reputation by offering resources like legal consultation and guidance, which can minimize the risk of costly lawsuits and help with proper handling of employment disputes.
What kinds of claims does EPLI cover?
EPLI covers claims related to wrongful employment practices, which can include:
- Sexual harassment
- Discrimination
- Harassment
- Retaliation
- Wrongful termination
- Wrongful discipline
- Breach of employment contract
- Negligent evaluation
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
Are there exclusions in EPLI policies?
While EPLI policies offer significant protection, there are exclusions. For example, most EPLI policies will not cover punitive damages awarded against a company Additionally, claims related to bodily injury or property damage are not covered, as these fall under other insurance types, such as general liability policies. Claims arising from illegal activities or intentional wrongful acts by employers are also typically excluded from EPLI policies.
How is EPLI different from other types of insurance?
EPLI is specifically designed to cover employment-related issues, while other types of insurance coverage focus on different aspects of business protection. For example:
- Errors and Omissions (E&O) insurance: Covers professional mistakes or negligence in the services a company provides.
- Directors and Officers (D&O) coverage: Protects company leadership from claims related to management decisions.
- General liability insurance: Covers bodily injury, property damage, and general business-related liability.
- Workers’ compensation insurance: Provides coverage for employee injuries or illnesses that occur on the job.
How to choose an EPLI policy
When selecting an EPLI policy, it's important to evaluate your company’s specific risks and needs.
First, consider the size of your workforce and the nature of your industry. High-risk industries may face more frequent employment claims. Work with an experienced insurance agent to assess your existing coverage and identify any gaps that EPLI can fill. Be sure to review policy limits, exclusions, and deductibles to find a balance between premium costs and the level of protection your business needs. Customizing your policy to fit your specific operations and employment practices will also help make sure you're adequately protected.
How to measure your EPLI policy’s effectiveness
To see how well your EPLI policy is working for your business, consider the number and types of claims made. A low volume of claims may indicate that your risk management practices are working well, while frequent claims could suggest the need for more employee training or policy changes.
Regularly review your policy with your insurance agent to make sure it aligns with your workforce, employment practices, and business needs. Monitoring trends in EPLI claims can help you gauge whether your coverage is keeping up with new risks and whether you have the right protection in place.
What to do if a claim is made against your business
If an EPLI claim is made against your business, act quickly and within your company’s policies and your insurance company’s guidance.
Notify your insurance provider immediately to initiate the claims process and begin gathering documentation. EPLI claims often involve sensitive employee issues, so consult legal counsel to guide your response. Maintain confidentiality while investigating the matter. A structured response plan, aligned with your EPLI coverage, will help you manage the situation efficiently and minimize the impact on your business.
Wrongful termination claims
Wrongful termination claims arise when a former employee alleges that they were unfairly dismissed without cause or in violation of employment laws. To handle wrongful termination claims, make sure your company’s termination procedures are well-documented and follow legal standards. Your EPLI coverage can provide support by covering defense costs and settlements.
Family and Medical Leave Act claims
Claims related to the Family and Medical Leave Act (FMLA) occur when employees believe their rights to unpaid leave for family or medical reasons have been violated. Having EPLI coverage helps manage these claims by covering legal fees and any potential settlements. It's also important to review your company’s leave policies regularly to ensure they comply with FMLA requirements.
Age discrimination claims
Age discrimination claims occur when an employee alleges they were treated unfairly based on their age. EPLI coverage can help protect your business from the costs associated with defending against these claims. As part of your risk management strategy, make sure your hiring and promotion practices are free from bias and that age-related policies are clearly defined.
Workplace harassment claims
Workplace harassment claims can result from a hostile work environment, inappropriate behavior, or discrimination. Your EPLI policy will provide coverage for legal defense and potential damages. To minimize the risk of harassment claims, offer regular prevention training and make sure that employees feel comfortable reporting issues to HR.
Frequently asked questions about EPLI
Still have questions about EPLI insurance? Learn more in the FAQs below.
How much does EPLI coverage cost?
EPLI cost can vary based on a number of factors, including the number of employees you have and the type of business you run. High-risk industries, such as hospitality or healthcare, may see higher premiums due to a greater likelihood of employment-related claims. On average, smaller businesses with fewer employees will pay lower premiums, while larger companies or those with a history of claims might pay more for EPLI coverage. It's important to get a quote from your insurance provider to understand the exact costs for your business.
How can businesses reduce their risk of employment-related claims?
To minimize the risk of employment-related claims, businesses should have a comprehensive employee handbook that outlines clear policies on workplace behavior, harassment, and anti-discrimination. Regularly training employees and managers on these policies can help create a safe and compliant work environment. Conducting thorough exit interviews and fostering open communication channels for employees to report concerns can also help mitigate risks.
Can EPLI be added to an existing business insurance policy?
Yes, EPLI coverage can often be added to an existing business insurance policy, such as a Business Owner’s Policy (BOP). However, if you require more extensive coverage, EPLI is often available as a stand-alone coverage option. It's best to consult with your insurance company to determine which option is best for your business needs, based on your risk exposure and current coverage.
Does EPLI cover legal defense costs?
Yes, EPLI typically covers legal defense costs associated with employment-related claims, including attorney fees, court costs, and settlements. This can be particularly beneficial for businesses facing costly lawsuits related to wrongful termination, discrimination, or harassment. Be sure to review your policy to understand any limits or exclusions that may apply to legal defense coverage.
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.