PROPERTY & CASUALTY
Employment Practices
Liability Coverage
Rob Freeman Jr., LEED AP
What is Employment Practices Liability Coverage?
Employment practices liability coverage helps protect your business from claims made during the policy period due to incidents that arise during the hiring process, employment and separation or termination of an employee.
If your business has at least one employee, EPLI provides you with protection against employee claims such as retaliation, wrongful termination, discrimination based on age, racial, religious or ethnic grounds, sexual harassment or other workplace-related harassment, failure to promote or hire, and other employment-related claims.
EPLI insurance provides coverage for employment-related claims in two primary ways:
- Defense Costs
EPL coverage helps pay for legal and defense costs and may provide additional legal services prior to an incident becoming a claim or escalating to a lawsuit. - Settlements and/or Judgment
EPLI pays for legal settlements and/or judgments if needed.
EPLI claims can be costly due to their complexity, time demand and difficulty to defend. As described below, the cost of EPLI insurance is considered beneficial when you compare the relatively low cost of an insurance premium against the time, cost and administrative burden of a legitimate employment-related practices claim, a bad actor or a difficult employee.
What Does Employment Practices Liability Insurance Cost?
Employment practices liability coverage cost is determined by many factors, including, but not limited to, the factors below:
- Size of your company in revenue
- Number of employees at your company
- History of any claims
- Employee hiring and workplace employment practices
- Geographic location
- Industry
Small businesses will pay less than larger businesses for EPLI because their exposure is smaller, and the likelihood of a claim may be less with fewer employees on staff. However, small to medium-sized businesses (SMB) may still experience a costly and disruptive claim. This is because SMBs usually do not have a full-time human resources department, or a legal team on staff, along with the employment infrastructure needed to handle a legitimate claim or the problematic behavior of an employee.
Is EPLI Insurance Beneficial?
According to Hiscox, a business insurance company, the average employee lawsuit costs employers $160,000, including the cost of defense and settlement. Whereas the cost of employment practices liability coverage can be a fraction of this amount.
Since the COVID-19 pandemic, the market for employment practices liability coverage has hardened considerably because of the higher frequency and severity of claims.
The EEOC reports vaccine-related claims as well as discrimination claims related to work-from-home/remote work policies and return-to-work requirements. You could also be the target of a lawsuit by employees outside your firm if a complaint is made by a third party against someone who works for you.
As an employer, you should also familiarize yourself with the laws that EPLI claims are often brought under, including:
- The Civil Rights Acts of 1964
- The Civil Rights Act of 1991
- The Age Discrimination in Employment Act
- The Americans with Disabilities Act (ADA)
- The Family and Medical Leave Act (FMLA)
You should aim to tap into the potential of every employee; however, you should also have systems in place to help provide guidance if problems arise in the workplace.
If a problem does present itself, have a process in place for safely and legally addressing the situation or terminating employees who do not improve.
Unfortunately, you can have processes and best practices in place and still be the target of an employee complaint that results in a lawsuit requiring a legal defense.
If you have questions about employment practices liability insurance for your business, or how to potentially reduce costs by packaging EPLI with directors and officers and other insurance in a management liability policy, please contact us to schedule an appointment.