Employment Practices Liability Insurance (EPLI) is an often overlooked yet vital insurance coverage. EPLI provides coverage for employers against claims brought against them by potential, former, and current employees. Types of claims include sexual harassment, wrongful termination, discrimination (disability, race, age, sex, etc.) and other allegations related to employment. EPLI can also provide coverage for 3rd party claims such as from an Independent Contractor or a Vendor.
Many businesses assume that coverage for these claims will be provided under their General Liability policy or their Workers’ Compensation policy. This common assumption is wrong, as EPLI claims are excluded under both General Liability and Workers’ Compensation.
When do I need EPLI Coverage?
Do you have employees? Are you currently interviewing to hire employees for the first time? If so, the answer is yes, you need EPLI Coverage. There is an exposure for EPLI claims during the hiring process, the employees course of employments, promotions received (or not received) and employee terminations.
You can be sued by a potential employee and without EPLI, your business will be responsible for the full cost of defense and any judgements made against you or your business. This is why this coverage is so vital to have. All it takes is one employee to sue you.
Why is this not covered under my Workers’ Compensation Policy?
Workers’ Compensation coverage provides coverage for employees who are physically injured or become ill while carrying out their job functions and duties. The only lawsuits that a Workers’ Comp policy will respond to are when an employee sues for injuries that the policy did not cover such as those caused by negligence on the part of the employer. Any lawsuit that claims the rights of an employee were violated will be excluded by Workers’ Comp.
Why do I need EPLI Coverage?
In our litigious society, EPLI claims are on the raise. You do not have to be a large company to be sued by an employee. That is another mistake business owners often make, they do not think they have enough employees to need the coverage. Without coverage, legal fees to defend a claim in court can easily be over $100,000 and can take over a year to resolve. Even claims that are fraudulent are expensive to defend against. In addition to legal fees, you will still need to pay any judgement made against you and for EPLI Claims, these can easily be $150,000 or more.
What are some examples of EPLI Claims?
The major causes of claims tend to be from discrimination, sexual harassment and wrongful termination. However, there are wide variety of scenarios that can trigger a claim such as illegal background checks, retaliation against an employee (wrongful discipline), invasion of privacy, defamation, failure to promote, deprivation of a career opportunity or promotion, benefit mismanagement, emotional distress, breach of the employment contract, wrongful demotion, and other conduct that is inappropriate in the workplace.
What can I do to Minimize my Exposure for an EPLI Claim?
Having procedures in place that follow local, state and federal laws is important. There should be written procedures for hiring, employee conduct, job description requirements and duties, etc. In addition, employees should be giving a copy of the employee handbook, with a signature page to document that they received it, and have read and agreed to it. Company policies regarding hiring, conduct, promotions and terminations needs to be in writing and used consistently for all employees.
We understand the importance of EPLI Coverage. Our Carriers have programs designed to help you prevent EPLI claims by providing assistance for their policyholders, which saves you money out of pocket because instead of using an outside lawyer, you have resources on hand with the EPLI Carrier to help you. That alone covers the cost of the policy. By providing free HR attorney assistance, you can help make sure your Employee handbooks are up to date. Many of our carriers will provide a hotline for business owners to call with employee termination and discipline questions to help avoid a claims scenario.
There is a growing trend in California where employees are trying to add EPLI claims along with Workers’ Compensation claims. The Worker’s Comp Carrier will deny the claim, leaving the business owner to cover the full cost of the EPLI Claim. These lawyers know that many small business owners will settle out of court because they cannot afford to defend claims out of pocket. EPLI coverage will help protect you from these types of claims that are added to Workers’ Comp claims, knowing they will be denied by the Workers’ Comp carrier and putting the burden of defense on the business owner.
Contact us today to get a quote and protect your business against costly EPLI claims.