8 Things You Need to Know About Employment Practices Liability Insurance

8 Things You Need to Know About Employment Practices Liability Insurance 

Employment practices liability insurance (EPLI) is unique  in that it changes with the prevailing issues in society. For instance, in 2008, the majority of the employment practices cases stemmed from employment-related claims of wrongful termination. 

Fast forward four years later, and many of the claims in 2012 involved sexual discrimination, retaliation, and racial discrimination cases. However, 2017 saw the emergence of wage and hour claims by disgruntled individuals.

The constant in this ever-changing battleground is that EPLI is one of the most common workplace claims, potentially shutting hundreds if not thousands of businesses down. 

It has become a necessity for business owners, employers, and employees to understand the nature of EPL insurance to reduce business risk and for everyone involved to know what to expect when an incident occurs.

8 Things You Need to Know About EPLI

These are the key pieces of information to know about this type of insurance:

  1. Employment Practices Liability Insurance Definition

What is Employment Practices Liability Insurance (EPLI)? EPLI is a business insurance type that activates when a management liability or wrongful act arises from employment practices. Some of the issues that may cause the filing of EPLI lawsuits to include claims under the scope of Title VII of the Civil Rights Act and other  employment-related incidents like:

  • Sexual harassment
  • Invasion of Privacy
  • Discrimination harassment
  • Emotional distress
  • Wage and hour violations

Employees may, at their discretion, file a claim violation with the Americans with Disability Act. However, wrongful acts by non-employees do not enjoy EPLI coverage or management liability insurance. But they can be included where it is stated explicitly under the EPLI policy.

  1. Difference Between Employment Liability Insurance vs. Employment Practices Liability

Employment Practice Liability Insurance is a policy that takes care of claims arising from Title VII of the Civil Rights Act and other legislation like:

  •  The Equal Pay Act of 1963 (EPA)
  • The Civil Rights Act of 1966 (CRA)
  • The Immigration Reform and Control Act of 1968 (IRCA)
  • The Americans with Disabilities Act of 1990
  • The Age Discrimination Act

On the other hand, employers liability aims to shield employers from the financial loss that can occur when a worker is indisposed or suffers a work-related injury outside the scope of Workers Compensation Insurance. This policy provides an extra layer of protection against potential legal expenses arising from illness, injuries, or death in the workplace.

  1. What EPLI Covers

Wrongful acts are included in the policy, but intentional acts are generally excluded from EPLI.

Wage and hour violations do not get EPLI coverage except where it is specifically included. Moreover, the coverage cost for wage and hour claims is typically limited to $100,000

The insurance company is often in charge of choosing the attorney who will defend the claim against the employer. The attorney must specialize in EPLI and is usually selected from a list of approved attorneys.

Punitive damages awarded to punish the defendant and which exceeds simple compensation may form part of EPLI coverage. However, it is vital to note that this coverage varies from state to state. For instance, EPLI does not typically cover punitive damages in California.

  1. Hammer Clause

EPLI policies often have a “hammer clause.” This provision states that if the policyholder does not agree to the earliest settlement opportunity recommended by the insurer, the insurer’s liability may be limited to the amount for which the claim could have been settled. The defense cost up to the settlement opportunity will be included in the damages.

  1. Carrier Can Deny

An EPLI claim often begins with a written demand for relief or when the EEOC receives charges. A claim may also start by serving a lawsuit or summons or as part of a regulatory inquiry. If a claim is not reported within the policy time frame, the carrier may deny the claim for coverage.

  1. Breach of Contract Exclusion

Breach of contract is typically excluded from EPLI coverage unless it relates to other allegations. The reason is that there is an assumption the terms will be executed where the insured enters into a binding agreement. If the contract terms are not fulfilled, there is an assumption the insured breached the contract on purpose.

  1. EPLI Cost

The cost of an employment practice liability insurance will depend on business size and other factors the carrier deems relevant. However, the average cost of EPLI ranges between $800 to $3000 per annum. This price can be higher or lower depending on several factors:

Employee Numbers

It is not unusual for companies with a large workforce to pay thousands of dollars in EPLI costs. The more employees in a company, the costlier the policy and vice versa.

Industry

The company’s industry also adds to the cost of employer practices liability insurance. Businesses in the retail or hospitality industry with direct intention with customers are more likely to have more EPLI claims and face higher fees.

Past Claims History

Businesses that have a history of EPLI claims will invariably pay more for EPLI coverage.

  1. How to Reduce EPLI Cost

Businesses can reduce EPLI costs by having robust human resource and employee grievance protocols. These criteria will cut costs in many ways; a proactive human resource will nip problems in the bud before they become potential Employment Practices Liability Insurance claims. 

Companies with a transparent employee grievance procedure will find it easier to dismiss lawsuits. EPL insurers encourage companies to have a robust HR infrastructure by offering discounts. 

Another alternative is to pay the premium per annum instead of monthly. This option is less expensive in the long term because carriers often provide discounts for yearly payments.

FAQs

Here are a few more answers regarding EPLI.

Does EPLI Cost the Same Everywhere?

EPLI cost varies from state to state. For instance, California, Delaware, Nevada, New Mexico, and Washington DC all have rising insurance costs because of increased insurance claims in the past decade. 

What Does EPLI Cover?

Employers Practice Liability Insurance protects against discrimination, sexual harassment, employment contract breach, failure to promote or employ, negligent evaluation, wrongful discipline, mismanagement of employee benefit schemes, and wrongful infliction of emotional distress.

Who Needs EPLI Coverage? 

It is recommended for all businesses to acquire EPLI coverage due to the steady rise in EPLI lawsuits in the past decade. Small and medium enterprises may be less likely to encounter a claim but can still be exposed to high-priced cases.

Before You Go

EPLI or EPL insurance protects business owners and employers against allegations of harassment, discrimination, and other employment practices violations. The Bar and Restaurant team of EPLI experts is here to help. If you need more information about our services or an Employment Practices Liability Insurance quote, reply here