Employment Practices Liability Insurance
WHAT IS EMPLOYMENT PRACTICES LIABILITY INSURANCE (EPLI)?
EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.
The number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such lawsuits. Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Businessowners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a stand-alone coverage.
Lawsuits against Employers: Some Sobering Statistics
- Employee lawsuits have risen approximately 400% over the last 20 years
- Of these, wrongful termination suits have risen more than 260%
- 41.5% of these lawsuits were brought against private employers with fewer than 100 employees
- When employee lawsuits go to trial, the employee wins more than 63% of the time
- The average cost to settle an employee lawsuit out of court is $75,000
- The average amount awarded to employees in jury trials is $217,000
PROTECTING YOUR BUSINESS FROM LIABILITY ISSUES
Numerous state and federal laws provide job candidates and employees with protections from discrimination and other unfair workplace practices. The number of employee lawsuits has increased in recent years, and any size business is vulnerable to this type of risk. Small businesses can be especially vulnerable because they are less likely to retain employment attorneys or have detailed employment policies and training programs.
In addition to taking steps to reduce your risk of employee lawsuits, you can financially protect your business by purchasing employment practices liability insurance (EPLI). Employment practices liability is generally notcovered by general liability insurance, but can be purchased as a stand-alone policy or added as an endorsement to a Business Owners Policy or Commercial Package Policy. Bear in mind that EPLI coverage may have more limits and exclusions as part of a package policy.
EPLI covers companies against claims or lawsuits filed by employees, former employees and employment candidates regarding their employment relationship with an employer. This type of coverage protects the company, its directors, and officers, as well as current and former employees. EPLI policies may also cover seasonal employees, leased employees and independent contractors.
What EPLI Covers
EPLI provides coverage for legal costs, settlements and judgments that arise from claims of:
· Discrimination, based on age, race, gender and other factors.
· Sexual harassment.
· Wrongful termination—including constructive discharge, in which an employee resigns as a result of the employer creating a hostile work environment; and retaliatory discharge, in which an employee is fired as punishment for engaging in a legally protected activity.
· Breach of employment contract.
· Infliction of emotional distress or mental anguish.
· Failure to employ or promote.
· Wrongful discipline or demotion.
· Mismanagement of employee benefits.
· Privacy violations.
· Violation of the Family Medical Leave Act or other such laws.
· Negligent evaluation
· Deprivation of career opportunity
· Wrongful infliction of emotional distress
Some policies contain a catch-all category to provide coverage for claims of discrimination based on protected categories (e.g., sexual orientation) that are not covered under federal discrimination statutes, but may be covered by state or local law.
EPLI coverage can also protect the business owner from meritless claims brought by disgruntled employees.
What’s Not Covered
While EPLI covers many areas of employment risk, most policies have certain exclusions, such as violations of the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, Occupational Safety and Health Act (OSHA), and the Employee Retirement Income Security Act (ERISA), as well as claims arising under workers compensation laws. EPLI also will not cover punitive damages or claims resulting from criminal acts. Privacy violations caused by a computer breach also may not be covered by EPLI.
Types of EPLI Coverage
The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.
Coverage is available on a claims-made or occurrence basis. Most EPLI policies are “claims-made,” meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid. The only time this isn’t the case is if the policy has a retroactive date, which allows coverage for an incident prior to the start of the policy. An “occurrence” policy will cover any claim for an event that took place during the period of coverage—even if the suit is filed after the policy lapses.
Defense provisions in EPLI policies may also vary. EPLI policies can be written with two types of defense provisions: a “duty to defend” provision places responsibility for managing defense claims with insurers; and a “non-duty to defend” provision assigns responsibility to the insured. Be sure to discuss these details with your insurance professional.
Is EPLI Insurance Expensive?
The cost of EPLI insurance coverage will vary from one company to another. Some factors that may influence cost include:
• The number of employees
• The amount of coverage purchased
• Whether or not your company has an anti-discrimination and anti-harassment policy in place
Whether or not your company has had any lawsuits files against it in the past
STEPS TO LIMITING YOUR LIABILITY RISK
Purchasing EPLI is an important way to manage employment risk, but ideally, your business will never face an employment practices lawsuit. Taking the following steps can help minimize the risk of such a lawsuit arising in the first place:
· Establish Clear Workplace Policies—Create written workplace policies on employment practices; post them and include in employee handbooks. Establish a policy for employees to report concerns and for management to respond.
· Educate Management and Employees—Train management, supervisors and employees about ethical and legal workplace practices. You may want to include diversity and sensitivity training as part of your employee education program.
· Provide Job Descriptions—Clearly define job expectations for all employees.
· Perform Regular Employee Reviews—Review employee performance and keep a written record of reviews.
· Keep Documentation—Maintain written records of all employment related practices, complaints, investigations, responses and so on.
· Create effective hiring and screening programs to avoid discrimination in hiring.
· Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
· Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
Call Premier Insurance Corp today at 239-542-7101 for answers to your questions about EPLI, including a review of your current policy.