Employment Practices Liability Insurance (EPLI)
Lawsuits can cost businesses hundreds of thousands, or in some cases, millions of dollars. To protect themselves against lawsuits made by employees, businesses need employment practices liability insurance (EPLI).
EPLI policies offer coverage to protect businesses against claims of discrimination, harassment, wrongful termination, and other employment-related issues made by employees. Without this coverage, businesses could suffer extreme financial damages if they are held liable in an employment lawsuit.
Here’s everything business owners need to know about employment practices liability insurance.
What is Employment Practices Liability Insurance?
Employment practices liability insurance, also known as EPLI or EPL Insurance, covers businesses against claims by employees that their rights as workers have been violated. This type of insurance can often be purchased as a standalone policy or as an endorsement on a Business Owner’s Policy (BOP).
EPLI is typically written on a claims-made basis, meaning any incidents that result in claims must have occurred during the coverage period. If the incident occurred before or after your coverage began, EPLI will usually not cover the resulting expenses. Businesses may choose to purchase tail coverage to extend their liability insurance beyond the end of the coverage period.
Many businesses opt to purchase substantial EPLI coverage to ensure they are financially protected against employment lawsuits. Small businesses, in particular, are often prone to employment lawsuits as they don’t have access to legal counsel to advise them on employment-related matters, such as properly terminating or disciplining employees.
What Does it Cover?
EPLI can help businesses mitigate their financial damages when they are sued by an employee.
Claims that may be covered by EPLI include:
- Discrimination
- Sexual harassment
- Wrongful termination
- Wrongful discipline
- Breach of contract
- Failure to promote
- Failure to employ
- Emotional distress
- Mismanagement of employee benefits
From the moment a business interviews a potential employee, it is at risk of being the subject of an employment claim. EPLI helps protect businesses against these claims to avoid significant financial damages.
How Much Does EPLI Cost?
Employment practices liability insurance can vary in cost depending on several factors, including:
- Number of employees
- Claims history
- Prior lawsuits
- Type of business
- Employee turnover rate
- And more
EPLI can be purchased as a standalone policy or included as an endorsement on a Business Owner’s Policy (BOP) or a general liability policy.
Do You Need EPL Insurance?
EPL Insurance is not legally required, but as most businesses are vulnerable to employment-related lawsuits, both small and large businesses should strongly consider purchasing EPLI coverage to protect against lawsuits.
For small and medium-sized businesses, in particular, the legal costs that can arise due to a lawsuit can be crippling. Even if your company is not held liable, defense costs can add up quickly.
If your business cannot comfortably afford a six-figure lawsuit, EPLI can offer the coverage you need to financially protect your business from claims made by employees.
How to Reduce Your Risk
EPLI can help protect your business against claims made by employees, but it’s still important to take steps to reduce your risk of being sued.
To avoid lawsuits, businesses can take the following preventative measures:
- Create an employee handbook that clearly details your company’s policies and procedures as they relate to discipline, termination, complaints, attendance, etc.
- Conduct regular performance reviews and make detailed notes regarding each employee’s performance.
- Establish procedures for employees to report harassment or discrimination.
- Make sure employers understand what constitutes inappropriate behavior.
- Ensure your employment application form contains an equal employment opportunity statement.
- Make it clear to prospective employees that employment will be at-will, meaning they can be terminated at any time, for any reason, with or without notice.
- Institute a zero-tolerance policy for harassment and discrimination.
- Maintain detailed records regarding any employee issues that arise, including what your company did to resolve these issues.
Business owners should also take time to learn more about federal, state, and local employment laws to ensure they are not violating their employees’ rights while conducting business.
While every business is always susceptible to employee lawsuits, there are steps you can take to reduce your risk and avoid costly lawsuits.
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Employment practices liability insurance may not be legally required, but it is strongly recommended as it can protect small and large businesses from the legal expenses that may arise if a worker alleges that your company violated their employee rights.
At KSA Insurance, we work with business owners in South Carolina and across the southeastern United States to help them find affordable EPLI policies that protect their businesses against costly lawsuits.
Contact us today to get a quote and learn more about employment practices liability insurance.
