Employment Practices Liability Insurance, commonly referred to as EPLI insurance, is an additional insurance coverage business owners can purchase to protect themselves from lawsuits brought against them by a former, current or possibly even future employees. The type of claims that could be brought or alleged against an employer would be for discrimination, wrongful termination, sexual harassment, whistleblower retaliation, compensation disputes or other employment claims such as libel and slander. There are times when Employment Practices Liability Insurance can be extended to cover claims made by third parties such as customers and vendors. All EPLI policies will pay for the defense costs associated with a claim, however it is important to know whether defense coverage is inside or outside the limits of insurance because there are exclusions in every policy. For example, compensation disputes, also called Wage and Hour claims, are sometimes limited to defense cost only (sometimes sub limits apply) meaning you as the business owner are responsible for any award the court may grant the plaintiff.
Why You Need It
EPLI claims are becoming a growing trend in our very litigious society. In fact, according to the majority of research information available, a business owner is more likely to have an EPLI claim brought against them than they are a General Liability or Property claim. That seems astonishing to most of us that live in Oklahoma due to all the catastrophic weather related claims we see each year. However, the studies conducted show that workplace related lawsuits are vastly more frequent than others. The lawsuit award amount is staggering to say the least. According to Liabilityinsurance.org, the average out-of-court settlement for an EPLI claim is about $40,000. If the case actually goes to trial, the average award amount is $218,000, and nearly 10% of these cases can result in an award of more than $1,000,000. Liabilityinsurance.org also states that the average cost to defend a wrongful termination or employment case is about $45,000, if not more. Most of the research I read elsewhere agrees that over 40% of plaintiff verdicts ranged between $100,000 and $500,000. If a business owner doesn’t have an EPLI policy or is not independently wealthy, how could they afford to stay in business after paying for the defense and award? If you look further than the tangible cost associated with these claims and look at it from a risk management standpoint, what else could be hindering your growth? A discrimination lawsuit could impact your day to day operations due to the loss of productivity and/or morale with the rest of the staff. It could also cause another physical loss to the company by having to pull an employee from their job due to the alleged offense. Purchasing EPLI insurance transfers the risk of such claims to the insurance carrier and allows you to focus on your business.
What It Doesn’t Cover
There are exclusions in every policy and I would encourage you to take the time and read them so you have a better understanding of what is NOT covered. EPLI policies typically will not pay out for items that are covered elsewhere in a policy or on a different policy such as bodily injury, property damage, workers compensation or insurance benefits. Also, intentional acts such as assault and battery or criminal conduct are excluded. In addition, since most policies limit coverage for Wage and Hour lawsuits. You should consider having an HR Risk Assessment done to limit this potential claim.