Protect Your Business with Employment Practices Liability Insurance
EPLI
EPLI stands for Employment Practices Liability Insurance. This type of policy covers a business in some of the following situations:
- Wrongful refusal to employ a qualified applicant
- Wrongful failure to promote an individual
- Wrongful demotion, evaluation, or discipline of an employee
- Wrongful termination or constructive discharge of an employee
- Harassment, coercion, or discrimination because of race, color, creed, origin, marital status, impairment, sexual orientation, pregnancy, or any other federal, state, or locally protected class
- Oral or written material that violates or invades a right of privacy
While this is not an exhaustive list, it provides a general idea of what EPLI covers.
Questions about Employment Practices Liability Insurance
Is this the same as Employee Benefit Liability coverage?
No, this is a completely different type of coverage. It is similar in name only; these products address two different facets of insurance coverage. Employee Benefit Liability (EBL) covers the employer in the event of error or omission in an employee benefit program such as health, dental, or life insurance.
Doesn’t my General Liability already cover this?
No, there are specific exclusions in the general liability policy for these types of risks. Most of the time, this coverage can be added as a rider to the general liability policy for a nominal cost.
Who is considered an “employee” under Employment Practices Liability Insurance?
A person employed by you (W-2), a current board member, or a temporary worker would all fall under this coverage. Independent contractors and leased workers are generally excluded. These types workers are generally excluded even from bringing a lawsuit because of their classification.
Is EPLI tied into workers’ compensation or unemployment benefits?
No, there is no tie-in. Workers’ compensation and unemployment benefits are valuable coverages, but are not related to EPLI. Workers’ compensation and unemployment benefits are excluded from this coverage.
What else is excluded from this coverage?
The following is not exhaustive!
- Dishonest, criminal, or fraudulent acts
- Employment practices that occur after your company is placed in bankruptcy, receivership, liquidation, or reorganization
- Any workers’ compensation, disability benefits, or unemployment compensation claim
- Exclusions relating to government oversight and labor laws
- Cost of complying with Americans with Disabilities Act (ADA) of 1990
- Lockout, strike, picket line, or labor disputes
- Any class-action suit involving more than one franchisee of the same franchisor
Most EPLI policies use a “claims made” insurance policy for this type of coverage. What does that mean?
With this type of coverage, a few things can affect coverage. One is the retroactive date. Let’s say you have a claims made policy in effect on January 2021 with a retroactive date of September of 2020 (when the policy started). If there is a claim in February 2022 for something that happened in January 2021, that claim would be covered. Anything that happens outside of those dates would be denied!
The second thing that can affect coverage is the extended reporting period. Because of the scenarios that can arise from the deficiencies from example, an extended reporting period may be needed. These can last for 30-60 days past the expiration, usually referred to as “tail” coverage. This is designed to cover claims that happen past the expiration.
To address claims that could arise for acts that occurred during a time before the policy was in effect, some companies offer “prior acts” coverage.
How does EPLI pay for defense costs and jury awards?
Most Employment Practices Liability Policies have defense and jury awards included in the same lump sum. In most other types of insurance policies, defense costs are separated from the liability in trial or arbitration costs. For example, an insurance company can run thousands of dollars for legal costs but may only pay a small amount in actual damages. Take, for example, an employer who is insured for $1,000,000 annually and has a judgement of $50,000. When their insurance pays out the $50,000, the policy would have $950,000 left for anything else that may happen during that year! If the legal costs are $400,000, it does not matter to the insurance company! The insurance company will pay the legal fees, and they will not count against your policy!
HOWEVER, with EPLI, the defense and award monies are usually combined. The remaining insurance benefit is lowered by both the defense costs and award verdicts. If the same scenario above were to happen, the overall limit would be lowered to $550,000 for the remainder of the year! VERY different type of scenario and coverage!
Please call us to discuss this valuable coverage.
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