What Is Employment Practices Liability Insurance (EPLI)?

Employment Practices Liability Insurance (EPLI) provides coverage to a business for defense costs and damages related to various employment-related claims such as allegations of wrongful termination, discrimination, workplace harassment, and retaliation.

In addition, the policies can cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation.

EPLI is becoming more common as employment lawsuits become a part of doing business in this litigious age. Large corporations typically have substantial EPLI coverage in place and are prepared to deal with just about any employment related lawsuit. Smaller businesses however are the most vulnerable to employment claims. That’s because they usually lack a legal department or employee handbook detailing the policies and procedures that guide employment related policies.

You're at risk of an employment claim from the moment you interview a potential employee. For example, if you choose not to hire a candidate, that person could allege that they were not hired due to some form of discrimination.

Alternatively, if you hire that person and later fire them due to poor performance, that discharged employee could claim wrongful termination.

What do I need to know about EPLI?

• 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 typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation or management liability (Directors & Officers Liability) are excluded from EPLI policies.
• EPLI is available as a stand-alone coverage and is also frequently sold as an endorsement or add-on to other types of business policies such as a management liability or business owners policy.
• It’s also important to note that EPLI policies are written on a claims-made basis instead of an occurrence basis like most other types of insurance policies - so it’s important to understand the distinction.

What Is The Difference Between An Occurrence Based Policy And A Claims-made Based Policy?

How do I prevent Employment Practices claims?

Employment Practices Liability Insurance is not meant to replace sound and secure employment practices. In fact, most insurance companies will not even consider insuring a company unless it has some basic employment practices in place.

Employee handbooks, post-incident investigation practices, and arbitration or mediation policies are some of the major items that insurance companies expect an employer to have when applying for an EPLI policy.

To prevent employee lawsuits, educate your managers and employees and develop official policies and procedures so that you minimize the likelihood of EPLI claims in the first place.

Sound Employment Practices and how to minimize Employment Practices Liability Exposure

We provide Employment Practices Liability Insurance for all types of firms in Newton, Needham, Wellesley, and all of Massachusetts. Contact Kovalev Insurance for employment practices liability insurance and request a complimentary consultation to ensure your business is properly protected.