Employment Practices Liability Insurance (EPLI) is definitely a misunderstood coverage but extremely important for business owners.
EPLI insurance protects businesses against claims made by employees or possible candidates when the company has been accused of violating the rights of an employee. The number of lawsuits filed against employers from employees is increasing due to economic conditions and the ever-changing legal environment. It is extremely difficult for a business owner to stay abreast of changing local, state and federal laws regarding employment practices, so having an EPLI policy in place is critical.
Here are some examples of what the typical EPLI policy may cover:
Discrimination,
Employment Contract Breaches,
Sexual Harassment,
Wrongful Discipline,
Failure to Promotion,
Employment Failure,
Wrongful Termination,
Wrongful Emotional Distress,
Employee Benefit Mismanagement,
Career Opportunity Deprivations,
Many small business owners may believe that only big corporations face lawsuits from their staff; however, this is not true. Any company can get sued by not just their existing staff, but also anyone they considered for employment or have since left the company.
Coverage for employment practices liability may be included or added to an existing Business Owners Policy (BOP); however, you will want to discuss with insurance agent what is included, and excluded from the specific policy. A separate policy may be more appropriate for your company's needs.
The cost of employment practices liability insurance varies by business. The premium can be determined by the number of employees, the type of business, the existing procedures in place and claim history of operation. For example, a company that has faced such lawsuits in the past would have a higher premium than a company with a clean record. More than one or two lawsuits put companies in a much higher risk category and will result in a higher premium. Call HPM Insurance to get an idea of the cost for your business.
A critical component of most EPLI policies is that it will not just cover the payout stemming from a covered EPLI claim, but also the cost of defense. With the cost of legal fees, this can be more than the payout! EPLI can also reimburse companies for court fees, judgment amounts and legal defense costs. The legal cost is covered regardless of whether your company wins or loses; however civil criminal fines or punitive damages are not included in the coverage.
An EPLI claim is not just a financial strain for a business but also an emotional strain. Here are several tools to help reduce or prevent an EPLI claim from occurring:
Employee manual: Like a smoke detector helps detain a fire, a good employee manual can help reduce the damage from an EPLI claim. Your business should have documented procedures in place that are updated as needed and distributed to all employees. It is not helpful to have an employee manual that no one sees and is not updated. It is also useful to have a procedure acknowledgement form recognizing that the handbook was received and understood by all employees with records kept in confidential employee files.
Open communication: Companies should also work with their management team and employees to minimize potential problems. By having a clear reporting plan in place, an issue may be able to be addressed before the situation escalates to a lawsuit. Employees need to know how to report an incident and who is in charge of reviewing such a report.
Interview practices: Companies should also form good screening and hiring habits when it comes to adding new employees. This can help reduce the possibility of a discrimination lawsuit.
Posters: Posters that are displayed in high traffic areas can ensure that employees are aware of the company's policies against negative practices.
No one wants to experience an employment practices claim as it can feel very personal. By making sure you understand what EPLI is and what coverage you need is critical to ensure you can do what you do best - run your business.
This material is for informational purposes only. All statements herein are subject to the provision, exclusions and conditions of the applicable policy. For an actual description of all coverages, terms and conditions, refer to the insurance policy.