Employers of all sizes are subject to federal and state laws regarding employment. Employment Practices Liability insurance is intended to protect business owners against unforeseen wrongful acts that may occur in the workplace. Organizations of every size, in every industry make decisions every day that impact their employees. Whether hiring, firing, promoting, terminating or accommodating disabilities, each of these decisions could lead to a possible EPL claim, if not handled correctly.
Don’t think an EPL claim will impact you? According to the EEOC, over 90,000 charges of workplace discrimination have been filed in each of the past five years. Defense costs and settlements associated with EPL claims can have a significant impact on a business. Below are some examples of claims EPL policy could cover:
- Wrongful Termination
- Discrimination (based on age, disability, race, religion, or sexual orientation, for example)
- Harassment
- Failure to Promote
- Retaliation
- FMLA (Family and Medical Leave Act) violation
- Wage & Hour violation
- Breach of employment contract
Who Needs Employment Practice Liability Insurance?
While it’s easy to suggest that all employers should purchase EPLI simply because they have employees, not all employers share the same risk profile when it comes to employment practices. As a result, their insurance needs vary as well.
Several factors influence an organization’s risk of facing wrongful employment practice allegations, including:
- Organization size
- Country of operation
- Industry
- Employee turnover
- Investment in employment practice risk management
It’s important to remember that an organization’s EPLI risk profile is not static. It can change over time as the organization grows, evolves, expands into new regions, undergoes restructuring, or shifts industries.
Additionally, broader shifts in employment practices, such as the rise of the #MeToo movement, the growth of remote work, or changing views on gender identity, can also increase risk.
Why Should A Business Purchase Employment Practices Liability Insurance (EPLI)?
There are two key reasons organizations invest in EPLI:
- Financial Protection – It provides a safeguard for your balance sheet. Even when an organization follows all the right procedures, accusations from current, former, or potential employees can still arise, and defending these claims can be expensive.
- Expertise and Support – Insurance providers are experts in handling such situations and offer specialized assistance when things go wrong.
What Is Not Covered By An EPLI Policy?
Insurance agreements outline the coverage intended by the policy, but they are subject to the policy’s exclusions, definitions, and terms. An insurance buyer needs to be aware of the perils listed under terms like “employment practices wrongful act” (or similar), as well as the relevant exclusions in an EPLI policy. The last thing you want is to assume coverage is provided, only to discover that an exclusion renders it invalid.
Common EPLI coverage exclusions include:
- Prior or pending claims (including prior notice or knowledge)
- Bodily injury or property damage
- Contractual liability
- Conduct-related issues
- Legal duties
- Nuclear/Radioactivity risks
- Exclusions where insurance or extensions are available, such as employee benefits, wage & hour claims, and third-party employment practices liability.
