Employment Practices Liability Insurance (EPLI) protects against employment-related lawsuits. 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 or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
Employment-related risks are generally not covered through a Business Owners Policy. You need to obtain this coverage through a separate policy.
Contact your Marsh insurance representative for a no-obligation analysis of your EPLI needs. If this assessment indicates that you are at risk for an employment practices claim, you can request your representative to work on your behalf to obtain a premium quotation.
EPLI policies reimburse your company for the legal costs of defending an employee suit plus judgments or settlements. They will not, however, pay for fines or punitive damages. They also do not cover workers’ compensation, bodily injury or property-damage cases, nor do they cover cases specifically covered by other insurance you have.
In 1991, the United States Congress passed the Civil Rights Amendments, which contained several provisions that have impacted the need for EPLI. One key provision was the requirement of a jury trial for most alleged types of work-related discrimination, if desired by the plaintiff employee. This set the tone for the expansion of Employment Practices Liability Insurance.
In the 1990s, several insurance companies developed Employment Practices Liability insurance policies as a stand-alone product or by endorsement to a Directors & Officers policy. Adding the EPLI coverage to the D&O policy proved to be not as effective.
EPLI is more "claims frequency" oriented while D&O is more "severity" oriented with less claims frequency. Both exposures are subject to the policy limits — so if you have three or four small EPLI claims and a substantial D&O claim in the same policy period, you may not have enough of your original limit of liability available to you.
Also insurance carriers monitor the EPLI experience and it can jeopardize a D&O renewal offer if they are covered on the same policy. Generally, the deductible on a stand-alone EPLI policy is lower than the deductible carried on a D&O policy which could save your entity thousands of dollars if you sustain more than one claim in a policy period.
Recognizing that smaller companies now need this kind of protection, some insurers provide EPLI coverage as an endorsement to their Businessowners Policy (BOP). Other companies offer EPLI as a stand-alone coverage.
More employers are aware of the importance of Employment Practices Liability Insurance (EPLI) because of high-profile court cases that have awarded millions of dollars to employees. Here are several examples:
- $157 million awarded to 800 female employees of a large domestic insurance company for "failure to promote" and "opportunity denial"/li>
- $134 million awarded to customers/patrons of a family restaurant chain for "race discrimination"
- $107 million awarded to 20,000 female employees of a convenience store chain for "sex discrimination"
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 scenarios that would lead to an employment-related lawsuit. Examples of best practices include:
- 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.