Employment Practice Liability Insurance (EPLI)
Today's litigious workplace and the advent of legislation such as the Americans With Disabilities Act and the Family Medical Leave Act have led to a marked increase in employment related claims and lawsuits. As the name implies, Employment Practices Liability Insurance (EPLI) provides broad insurance protection from such employment-related claims and lawsuits brought against a company, its managers and employees, and its directors and officers.
Covered Actions
The following employment-related charges are typically among those actions covered by EPLI:
- Age, gender and other forms of discrimination
- Sexual harassment
- Wrongful discipline and termination
- Negligent hiring, promotion and compensation decisions
- Breach of employment contract
- Emotional distress/mental anguish
- Invasion of privacy
- Slander or libel
- Mismanagement of employee benefits.
How It Works
EPLI policies are written on a claims-made basis. That is, in order for a claim to be covered, it must be reported to the insurance company during the policy term -- or within any extended reporting period granted by the insurer. In addition, the event leading to the claim must have occurred on or after the policy's retroactive date (typically, the earliest date of continuous EPLI coverage). Some insurers offer extended retroactive dates or full prior acts coverage.
You can generally purchase insurance limits of $1 million up to $25 million. Premiums depend on the type, size and risk profile of your business. A company's employee manual and personnel policies may be considered when determining risk, especially among larger firms.
Most EPLI policies include a deductible. In addition, the cost of defense is typically included in the aggregate insurance limits, along with the costs of judgments and settlements.
Some Directors & Officers Insurance policies contain Employment Practice Liability coverage. However, such coverage can be limited to directors and officers and may have greater exclusions than a stand-alone EPLI policy.
Also note that some EPLI policies may contain exclusions that limit coverage during events such as a major work force reduction, acquisition or merger. Generally, criminal conduct is not covered by EPLI. It is important to review exclusions and coverage limitations when selecting an EPLI policy.
All companies, regardless of size, should seriously examine their personnel policies in light of increases in both the number and severity of employment-related claims. In addition, EPLI can be an invaluable tool in your risk management arsenal.
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