Employment Practices Liability Insurance, or EPLI, protects businesses against claims from current employees, former employees, or applicants who allege their legal rights were violated in some way. The legal costs associated with employment-related claims, even if they are untrue, can be staggering, and unfortunately, these types of claims are on the rise. If you aren’t protected, now is the time to find the right policy. EPLI is critical in any business, especially those without a dedicated HR department, as well as those operating in the following industries:
Allied Insurance Managers offers two primary types of EPLI: first-party and third-party. First-party coverage protects against claims made by current or former employees, while third-party coverage protects against harassment or discrimination claims made by customers, vendors, and other non-employees.
The following is a more detailed look at what type of risks are often covered with an EPLI policy, although the list is not comprehensive:
These claims are filed when current or former employees feel they have been discriminated against based on gender, age, race, religion, disability, and other protected characteristics, or when they’ve felt sexually harassed or bullied in the workplace.
Wrongful termination claims are submitted when an employee believes their termination or firing was in violation of the law, public policy, or through constructive discharge (conditions that forced an employee to quit).
EPLI overage includes protection against a breach of implied contracts, such as those implied in employee handbooks or given in oral agreements. This does not include written contracts.
Failure to promote, failure to hire, a wrongful demotion, and more are protected under Employment Practices Liability Insurance.
Although EPLI doesn’t typically cover pure wage/hour claims, including unpaid wages and overtime, it can protect against wage/hour claims brought from job reclassification, compensation restructuring, and demotions.
Founded in 1987, Allied Insurance Managers is Michigan’s leading independent insurance agency. Our carrier partnerships allow us to provide our clients the most competitive choices available on the market today. We have experience working with businesses in many industries, ranging from manufacturing and contract work to bars, restaurants, and grocery stores. Our goal has always been to find cost-effective plans that provide optimal protection year-round.
General liability covers on-premise injuries and property damage experienced by the general public or visitors, while EPLI is reserved for workplace accidents involving employees. For example, a customer slipping and falling inside a grocery store might result in a general liability claim. Comparatively, an EPLI may be filed if a customer allegedly harassed an employee and that employee did not believe appropriate action was taken to remediate the situation.
There are a few types of employee-related issues that are excluded from this coverage, including hour and wage violations, criminal acts, workers’ compensation claims, property damage or bodily injury, fines and punitive damages, breach of an employment contract, prior or pending litigation, and employee benefit administration errors.
EPLI coverage protects businesses, including owners, directors, officers, management personnel, and can even extend to former or prospective employees.
Employee count/business size, claims history, industry risk, high turnover, and locations in high-litigation states influence premium costs.
No. EPLI policies generally do not include third-party claims, but they can be added if desired.
Yes. EPLI is often included as an endorsement to a Businessowner’s Policy (BOP), which can make the process of covering wrongful termination, harassment, and discrimination claims easier for small businesses.
Yes. Nonprofits are treated differently as policies must be customized to include board members, volunteers, and in some cases, third-party harassment.
The main difference is the timing of the coverage activation. For claims-made occurrences, incidents are covered that are reported during the active policy period. For occurrence, the claim can be filed whenever, but the occurrence had to have taken place during the policy period.
This is also called the “look-back” date, which is specified in the claims-made policy. It designates the earliest date a wrongful employment act can occur and be eligible for policy coverage. This means claims that are filed during the current policy term should still have occurred before this date, or they would be excluded from coverage, which prevents “stale” claims from being filed.
A hammer clause, sometimes called cooperation causes or consent to settle, effectively acts as a settlement cap, which limits the insurer’s liability to a set amount which is deemed reasonable. If an employer does not settle a claim at this time, then they can be forced to pay further legal defense costs. There are both soft and hard hammers; soft hammers split future costs between the employer and employee, while hard hammers place all risks on the insured. Employers can negotiate to remove this clause or negotiate the percentage of responsibility to ensure the policy covers additional expenses.
Yes. There are several ways to effectively reduce EPLI premiums over time, including creating a robust HR policy, using third-party PEOs, developing a legally vetted employee handbook, ensuring regular training for managers and employees, and implementing consistent hiring and firing procedures.
Directors and Officers, or D&O Insurance, are complimentary. EPLI will cover employee-related claims, including wrongful termination, and harassment, while D&O effectively protects leadership from mismanagement claims.