What Is Employment Practices Liability Insurance, or EPLI?
Legislation such as the Family Medical Leave Act and the Americans With Disabilities Act, plus a growing number of job-related lawsuits and claims, have created the need for business owners to consider a type of insurance known as employment practices liability insurance, or EPLI. An EPLI policy offers insurance protection against claims and lawsuits that are brought against a business, its officers or directors, or its employees and managers. These policies generally cover charges in the following areas:
- Gender, age and other types of discrimination
- Sexual harassment
- Wrongful termination or discipline
- Negligent compensation, promotion or hiring decisions
- Breach of contract for employment
- Emotional distress or mental anguish
- Invasion of privacy
- Libel or slander
- Employee benefits mismanagement
While some directors’ and officers’ insurance policies contain employment practices liability insurance coverage, such coverage can be limited to directors and officers, and may have greater exclusions than a standalone EPLI policy.
How does employment practices liability insurance protect your business?
All companies, regardless of size, should look to their personnel policies as the first line of defense against both the number and severity of employment-related claims. EPLI coverage is another valuable tool in a comprehensive risk-management arsenal.
EPLI policies are written on a claims-made basis. This simply means that covered claims must be reported to the insurance company while the policy is in effect, or within an extended period specifically described in the policy. In addition, the event leading to the claim must have occurred either on or after a specific date - typically the date when the EPLI policy commenced. Some insurers offer extended retroactive dates or full protection for earlier claims, but you should be sure you understand these terms.
The cost of EPLI coverage will vary based on the type, size and risk profile of your business. The insurance company may also want to see your written personnel policies to help them determine the risk and cost of your EPLI policy.
Following are additional factors that affect the value and cost of EPLI coverage. It is important to review these exclusions and coverage limitations when evaluating your policy:
- You can generally purchase EPLI coverage with limits ranging from $1 million to $25 million.
- Most employment practices liability insurance policies include a deductible. In addition, the cost of legal defense is typically included in the aggregate insurance limits, along with the costs of judgments and settlements.
Some EPLI policies 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.