EPLI covers employees who make claims against you for illegal acts such as discrimination, wrongful dismissal, or retaliation. The insurance covers judgments, settlements and costs of defending your company in employment-related lawsuits. EPLI protects you from discrimination lawsuits brought by former or current employees, and job seekers.
Takeaways from the Key Notes
- The employment practices liability insurance protects your business from claims made by employees, past or present, for acts of discrimination, wrongful termination, and other wrongful acts.
- The majority of EPLI policies cover all claims made against your business.
- The EEOC must be contacted by employees before they can sue for discrimination.
- To protect their businesses from discrimination claims and costly costs, companies need to have EPLI.
What is Employment Practices Liability Insurance?
EPLI provides coverage for claims made by employees, including current and former employees, as well as third parties such vendors and customers. 2
EPLI covers the costs of defending a business against lawsuits and damages awarded by claimants. The EEOC may file regulatory actions against your business. 3 Some policies include defense costs as part of the policy limit.
The majority of EPLI policies cover claims against your business as long as your policy is active. The policy does not cover claims that are filed after the expiration date. Most policies require that you report any claims made to your insurer within the period of coverage.
Some policies do not cover claims that result from ” Prior Acts” which are incidents occurring before the policy was issued. Some policies cover claims that result from prior acts which occurred after or on a certain date. This date is called the retroactive date. The retroactive date will usually be the date you first purchased an EPLI policy.
Note:
You must first file a complaint with the Equal Employment Opportunity Commission to be able to sue your employer.
What types of claims does EPLI cover?
EPLI is designed to cover claims made by employees, whether they are current, former or prospective, who claim that their employer has violated their civil right through wrongful acts such as harassment, discrimination (including sexual harassment), and wrongful termination.
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Most policies cover claims made based on:Â 8
- Wrongful discipline
- Employing or promoting someone who is not qualified
- Negligent evaluation
- Career opportunities denied
- Infliction of emotional distress by mistake
- Employee Benefit Plans Mismanaged
- Retaliation
- Breach of Employment Contract
Retaliation is a term used in employment law to describe taking revenge on a worker who has done something protected by federal law. For example, complaining about sexism or asking for an accommodation due to a disability.
What does employment practices liability exclude?
Some EPLI policies exclude all claims that involve:
- Injury to the body or damage to property
- Wage and Hour Law Violations
- Law violations Workers Compensation Workers Compensation
- Labor disputes
- Fraud or dishonesty
- Violations against federal laws such as the Occupational Safety and Health Act and the Worker Adjustment and Retraining Notification Act
- Unemployment insurance
- Punitive damages
- Fines and penalties, whether civil or criminal
Many states do not allow insurance that covers punitive damage. Insurance that covers punitive damage is prohibited in many states. 11
Why Businesses Need EPLI
Consider the cost of a claim relating to employment when deciding whether EPLI is right for your business. The federal law limits the amount a worker may recover for damages in a discrimination lawsuit. Limits vary based on the size and type of employer.
The average settlement out of court for a discrimination case in 2020 was $75,000, while the average jury verdict was $217,000. 14
If you don’t have an EPLI and your company is faced with a discrimination lawsuit, then your company must pay for all the costs.
How much does EPLI cost? According to Insureon, as of January 2024, many small businesses pay an average annual premium of $2 665.
Employer Liability Claim Example
Understanding how age discrimination works can be better understood by looking at an example of a claim for employment.
Let’s assume Beth is 52 years old and has been a Fancy Furniture sales representative for 15 year. Beth’s boss tells her that a 25 year old will be replacing her. He claims that Fancy Furniture is looking to attract young buyers and therefore needs younger salespeople. Beth sues Fancy Furniture in the amount of $75,000
FAQs (Frequently Asked Questions)
Does general liability include employment practices liability?
General liability is different from employment practices liability. EPLI includes claims made by employees relating to their employment, such as sexual harassment and discrimination . This excludes physical injury or property damage claims. The general liability policy covers third-party claims for bodily injury, property damage or advertising injury caused by an offense covered by the insurance such as libel. General liability policies do not cover claims for discrimination or other employment-related actions.
What is the difference between professional liability and employment practices liability?
Professional liability insurance protects you from claims made by customers who have suffered financial loss due to mistakes or bad advice that you provided while offering a professional service. Employment practices liability coverage covers civil rights violations such as discrimination or wrongful termination. The insurance may cover regulatory actions brought by the EEOC.
What is excluded from the Employment Practices Liability?
EPLI excludes claims involving bodily injuries, breaches of contract, criminal and fraudulent acts, labor disputes, including strikes, unpaid wages or workers compensation benefits. 8 Policies do not include claims resulting from violations such as the Act on Employee Retirement Income Security and National Labor Relations Act.
The Bottom Line
The employment practices liability insurance covers businesses against claims of discrimination or retaliation by employees. Your EPLI will cover the costs of your defense and any award or settlement if an employee brings a discrimination lawsuit against your business.
Consider purchasing EPLI if you own a business. Employment-related claims could result in large payouts.
SOURCES OF ARTICLE
Adsrocks’s writers are required to use primary resources to support their writing. White papers, government statistics, original reporting and interviews with experts in the industry are some of these sources. Where appropriate, we also refer to original research by other reputable publishers. Our editorial policies will tell you more about our standards for producing accurate and unbiased content.
- Laner Muchin. ” Employment Practices Liability Insurance.”
- Marshall Sterling. ” Third Party Employment Practices Liability Insurance.”
- GBA Insurance. ” EPLI Guide.”
- Progressive. “Claims-made Vs. Occurrence.”
- Insureon. “Rectroactive Date.”
- Equal Employment Opportunities Commission. ” Filing A Lawsuit.”
- Equal Employment Opportunities Commission (EEOC). ” How to file a charge of discrimination.”
- The Hartford. The Hartford.
- Travelers. What is EPLI insurance?
- Equal Employment Opportunity Commission. “Retaliation.”
- Chubb. Chubb.
- Equal Employment Opportunity Commission. “Remedies For Employment Discrimination.”
- AmTrust Financial. ” Top EPLI Claim Trends, Statistics & Examples.”
- Insureon. Employment practices liability insurance cost.
