What is EPLI?
Business owners are not immune to lawsuits filed against them, so to protect themselves, they purchase what’s called EPLI (Employment Practices Liability Insurance) coverage. EPLI covers businesses against claims made by workers whose rights have been violated by the company. Most elect to have this coverage as an endorsement to their Business Owner Policy (BOP), or take advantage of the coverage as a stand-alone policy. In addition to all regular employees, an EPLI policy may cover seasonal employees, leased employees, and independent contractors. After the deductible has been paid, the EPLI covers damages including settlements, back pay and front pay awards, attorney’s fees and costs and defense expenses.
For example: If a 60-year-old employee and a 30-year-old employee are applying for the same promotion, the employer cannot deny the older employee the promotion for the fact that he is “too old”. If that is found to be the case, the older employee would be able to sue the employer for discrimination, but if there was an EPLI policy in place, the employer wouldn’t be financially devastated. Otherwise, the settlement and all those legal fees would be paid out of pocket by the employer. EPLI policies are made on a claims-made basis which means that the policy would only pay out if the incident happened while the coverage was in effect AND when the claim was filed, so if the employer purchased coverage after denying the employee the promotion, the case may not even be covered.
EPLI protects the business against claims involving:
– Wrongful termination
– Discrimination (based on age, sex, race, religion, color, and national origin)
– Breach of contract
– Sexual harassment
– Emotional distress
In addition to what’s already covered, some policies have a “catch-all” category to provide coverage for claims that are not covered under federal discrimination statutes, but may be covered under state and local law (e.g., sexual orientation). A carrier may provide a list of categories protected by the policy, then add that it covers those and “other protected classes”.
EPLI typically excludes coverage for claims involving:
– Wage and hour laws
– ERISA (Employee Retirement Income Security Act)
– WARN acts
– Unemployment benefits
– Criminal/civil fines, penalties, or punitive damages
EPLI typically excludes bodily injury and property damage claims because there are other types of insurance that the employer can purchase to cover those claims.
At Assistance Insurance, we’re here to help you with your EPLI coverage every step of the way, so if you’re a business owner with more questions and would like a quote, feel free to give us a call today!