Employment Practices Liability (EPL)

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. This coverage provides Employer protection from a range of employee-based lawsuits.

What does EPL Insurance Cover?

The employment practices liability exposure begins when a business hires its first employee. A new employer must first identify the job responsibilities of the employees they seek. The business must clearly define the job requirements and expectations, the training needed and the training the employer will provide, as well as the output expected of each type of employee. If employer expectations differ from employee perception of the job duties and compensation, EPLI claims may follow.

The employer must develop excellent recruitment and hiring practices. Its procedures should be carefully evaluated and published in a manual that every supervisor is expected to read and understand. The procedures must be monitored to make sure all are followed in every circumstance.

What Is NOT Covered By Employment Practices Liability Insurance?

EPLI exclusions must be examined carefully because many of them have conditions, exceptions, limitations or restrictions. Coverage does not apply to:

  • Criminal, Fraudulent or Malicious Acts – An insured’s liability as a result of criminal, fraudulent or malicious acts or omissions by that insured is excluded. The insurance company’s defense duty remains until legally determining the existence criminal, fraudulent or malicious act or omission.
  • Contractual Liability – Any wrongful act for which the insured is obligated to pay damages because of assuming liability solely via a contract or agreement is not covered.
  • Workers Compensation – Any obligations of the insured imposed by any workers compensation, disability benefits, unemployment compensation or similar law are excluded.
  • Violation of Laws Applicable to Employers – Coverage does not apply to the named insured’s violation of its responsibilities or duties required by any federal, state or local statute, rule or regulation, and any related rules and regulations developed to apply to them, other than the following:
    • Title VII of the Civil Rights Act of 1964
    • The Americans with Disabilities Act (ADA)
    • The Age Discrimination in Employment Act
    • The Equal Pay Act
    • The Pregnancy Discrimination Act of 1978
    • The Immigration Reform and Control Act of 1986
    • The Family and Medical Leave Act of 1993
    • The Genetic Information Nondiscrimination Act of 2008
    • Any other similar state or local statute, rule or regulation that prescribes responsibilities or duties involving the same acts or omissions.
    • Amendments to the above
    • A wrongful act that is the result of the named insured’s failure to comply with required accommodations for the disabled and any expenses incurred resulting from required accommodations for the disabled due to ADA or any amendments to the act continue to be excluded.

Does My Business Need Employment Practices Liability Insurance?

The employment practices liability exposure begins when a business hires its first employee. A new employer must first identify the job responsibilities of the employees they seek. The business must clearly define the job requirements and expectations, the training needed and the training the employer will provide, as well as the output expected of each type of employee. If employer expectations differ from employee perception of the job duties and compensation, EPLI claims may follow.

The employer must develop excellent recruitment and hiring practices. Its procedures should be carefully evaluated and published in a manual that every supervisor is expected to read and understand. The procedures must be monitored to make sure all are followed in every circumstance.

How much does EPLI Insurance Cost?

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.

This policy will reimburse your company for defense (legal) costs, judgements and settlements.

The policy covers legal costs, whether your company wins or loses the suit. However, this type of policy does not typically pay for punitive damages or civil or criminal fines.

EPLI coverage is usually written on a claims-made basis. This means the incident resulting in the claim had to occur during the coverage period. Because employment claims often come months or even years after the alleged incident, your company might be vulnerable if your insurance coverage was dropped or if tail coverage (liability insurance that extends beyond the end of the policy period) wasn’t purchased.

How can I prevent EPLI claims?

Here are some basic strategies and processes to put in place that help prevent employee lawsuits:

  • 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.