Employment practices liability insurance also known as EPLI is a vital part of any business asset protection plan if they have employees. EPLI protects businesses against claims made by employees or potential employees that claim the company is violating their rights or discriminating against them in an illegal way. There has been a huge increase in the number of employment practices liability lawsuits filed against employers in recent years. Insurance companies are recognizing the increasing need for this coverage and many are responding by adding some incidental coverage to their package policies. Keep in mind that these automatic coverage limits are limited. In most cases the insurance companies offering the automatic EPLI coverage often are offering higher limits on the package policy (Either a BOP or Enhanced CPP). Some insurance companies offer EPLI policies as an stand alone separate policy rather than within a BOP or CPP. EPLI policies offer protection against several types of claims, some of which are listed here:
- Wrongful Discipline
- Employment Contract Breaches
- Sexual Harassment
- Discrimination
- Promotion Failure
- Employment Failure
- Negligent Evaluation
- Wrongful Emotional Distress
- Employee Benefit Mismanagement
- Career Opportunity Deprivations
- Wrongful Termination Negligent Evaluation
Employment practices liability insurance costs vary for different businesses. Premiums depend on the number of employees, the type of business and the history of the business. If a company has faced an EPLI claim or actual lawsuit, many claims get settled before the lawsuit stage, in the past would have a much higher premium than a company with a clean record. Multiple lawsuits are likely to make a business uninsurable or at the very least pay a much higher premium.
So you think you might need an EPLI policy but you wonder what will it really do for you? Employment practices liability insurance will reimburse companies for their court fees, judgment amounts and legal defense costs, but typically not civil criminal or punitive damages if awarded by the court. Defense/legal costs are covered regardless of whether the company wins or loses however you will need to ask if defense costs are unlimited or within policy limits. This can be significant in a large legal battle. EPLI policies do not cover liabilities that are covered in other types of policies. Even though you may have a quality EPLI policy in place no employer wants to have an EPLI claim and so, all companies should work with their managers and employees to minimize problems and exposures to EPLI losses in the workplace. As a manager or owner you should act immediately to all possible EPLI situations and take action to make sure no further incidents arise.
Companies should create and adhere to good screening and hiring habits when it comes to selecting new employees. This will help avoid potential discrimination lawsuits. Holding regular meeting to discuss EPLI issues will help make employees aware of the company's policies against negative practices. You could also consider hanging posters that clearly outline the company's policies. Consider sending your policies to employees by email or written correspondence on a regular basis. Company policies should also be included in employee handbooks and training manuals. When employees experience an EPLI issue, they should know what to do next. For instance, if an employee is the object of sexual harassment, he or she should know how to report the occurrence and who is in charge of reviewing such incidences. All reports and responding actions should be clearly documented by the company. To find out more about this topic please ask your agent.