What is Employment Practices Liability Insurance (EPLI)?

EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.

The number of lawsuits filed by employees against their employers has been rising. 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 insurers provide this coverage as an endorsement to their Businesswomen (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI asa stand-alone coverage.

EPLI provides protection against many kinds of employee lawsuits,including claims of:

• Sexual harassment
• Mismanagement of employee benefit plans
• Discrimination
• Wrongful infliction of emotional distress
• Wrongful termination
• Deprivation of career opportunity
• Breach of employment contract
• Wrongful discipline
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline

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. 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. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.

To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:

• Create effective hiring and screening programs to avoid discrimination in hiring.
• Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
• Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
• Document everything that occurs and the steps your company is taking to prevent and solve employee disputes

When do I need Employment Practices Liability Insurance?

Employment Practices Liability Insurance is needed as soon as you start to hire employees. Most investor sand directors will require that you carry this coverage as part of your Directors and Officers Liability Insurance since they can also be held liable in suits relating to employment practices

Why do I need Employment Practices Liability Insurance?

Cases against employers are on the rise. It is estimated that three out of five firms will be sued by an employee .Companies are finding that they are vulnerable from the pre-hiring process through the exit interview, even if the employee was never hired, or only at the company a matter of days.

It can happen to ANY firm. We have all experienced it. It could be a joke told in the break room, an employee you had to fire, a “friendly” programmer, or that person you chose not to hire. Every employer faces the reality that it will be the target of legal action from past, present and prospective employees. Even if the claim is groundless or fraudulent, the defense of a suit can be expensive in time, resources and financially.

New technology firms are especially vulnerable. Newer and fast growing companies are often prey to these types of claims because their management team has not yet designed or implemented procedures for hiring, firing, and disciplining employees.