EPLI Insurance – What It Is and When to Get It

WHAT IS EMPLOYMENT PRACTICES LIABILITY INSURANCE?

Employment Practices Liability Insurance (EPLI) is a policy that covers an employer’s legal defense costs – including settlements and damages – when an employment relationship ends on bad terms.

Unlike many Commercial Liability policies, which typically exclude claims involving employee-employer conflict, an EPLI policy will cover a company, its directors, and eligible employees if they are sued by an employee alleging discrimination, harassment, or wrongful termination.



WHAT DOES EMPLOYER PROTECTION INSURANCE COVER?

EPL Insurance helps cover the costs of claims alleging wrongdoing from the employer’s side during their employment relationship. The most common types of claims include:

• Discrimination (whether it’s based on sex, race, age, disability, etc.)
• Wrongful termination
• Sexual harassment
• Retaliatory claims
• Unpaid internships
• Illegal background checks
• Failure to employ or promote

Other common claims also include:

• Defamation
• Invasion of privacy
• Mismanagement of employee benefit plans
• Wrongful infliction of emotional distress

What Does Employer Protection Insurance Exclude?

Although claim eligibility varies by state, the following claims are commonly not covered under EPLI policies:

• Prior or pending claims
• Fines associated with conduct that is criminal or malicious in nature
• Contractual liabilities
• Bodily injury
• COBRA violations
• Wage and hour claims
• Perils covered by other insurance policies

HOW MUCH DOES EPLI COST?

The cost of an EPLI policy will vary depending on a company’s size and type, claims history, and the existence of a legally-compliant employee handbook detailing the company’s employment policies and procedures. According to Advisen, the premium price for a standard $1 million EPL insurance policy averages $4,900 a year.

Companies can also purchase additional coverage, such as third-party EPLI, to protect themselves against claims brought by vendors, clients, or other third-party members outside their organization – though this typically only covers harassment and discrimination claims.



HOW DOES EMPLOYMENT PRACTICES LIABILITY INSURANCE WORK?

EPLI is written on a claims made basis. This means that coverage is only available if the claim is made during the time period – usually a year – during which the policy is in force. So long as your policy is in force when the claim is made, it doesn’t matter if an incident happened before you bought EPLI coverage.

There are some notable differences between EPLI policies, though. For example, while the standard “claims-made” policy comes with no duty to notify, “claims-made and reported” policies require that you report the claim to the insurance company before the policy expires.



Some policies also include a ‘retroactive’ or ‘continuity’ date that limit coverage to incidents that happened after that date.

Finally, it’s important you understand how covered employees are defined in your EPLI policy – for example, some policies may exclude consultants or temporary workers.

WHEN SHOULD YOU GET EPLI COVERAGE?

Pretty much right now.

Employer’s liability claims are commonplace, expensive, and unpredictable – particularly when it comes to discrimination. That’s why every company needs EPLI to cover the costs of employee claims.

Large employees can hire excellent lawyers. However, without EPLI, the costs of liability claims could deplete their legal department’s budget. Small employers aren’t protected from employment claims either. Laws such as the Uniformed Services Employment & Reemployment Rights Act (USERRA) – which prevents veterans from discrimination – apply to businesses of any size.

Once a company reaches the 50 full time employee mark, most anti-discrimination laws – including the Civil Rights and Americans with Disabilities Act – will apply to them as well.Getting EPLI coverage adds an extra layer of protection that can cover the costs of a legal defense, as well as any settlement that your company may reach, for way less than it would cost if it weren’t there.

Furthermore, since insurers can provide sample HR policies, training, legal advice, and even pointers on things like how to throw a politically correct party, your chances of receiving claims will be drastically reduced once you buy EPLI coverage.

Employer Practices Liability Insurance offers an effective way to manage the costs of employee claims – but only if the policy is in place before the claim was made. So make sure you clear any doubt with your trusted broker before signing an EPLI, and if you don’t have one, reach out.