Employment practices liability insurance, or EPLI for short, is a type of liability insurance often acquired by business owners. With EPLI, businesses are protected against claims made by workers alleging wrongful termination, harassment, discrimination, or another workplace-related issue. While these types of lawsuits are most commonly seen within large corporations, small businesses can also fall victim to employment claims. However, unlike larger corporations that have strict policies and procedures in place to deal with such claims, many new and small businesses do not have the experience or resources to handle employee lawsuits. That is why many business owners rely on EPLI. Learn about employment practices liability insurance and who should consider it.
What Exactly Does EPLI Cover?
EPLI is in place to cover companies against claims or lawsuits filed by current employees, former employees, or job candidates regarding employment-related issues. In some instances, EPLI may also cover leased employees, seasonal employees, and independent contractors. When business owners choose to have EPLI, they can use their benefits to cover expenses from defending themselves against claims and lawsuits regardless of the outcome. Employment practices liability insurance provides protection against many types of employee lawsuits, including claims relating to:
- Discrimination (based on sex, age, race, color, religion, or national origin)
- Sexual harassment
- Failure to employ or promote
- Deprivation of career opportunity
- Mismanagement of employee benefits
- Wrongful infliction of emotional stress
- Breach of employment contract
- Wrongful discipline
- Negligent evaluation
- Wrongful termination (including retaliatory discharge and constructive discharge)
Employment practices liability insurance protects not only the business owner, but also your managers, officers, and directors. While having this type of insurance cannot prevent employees from bringing claims or lawsuits against you, it can save you from financial distress in the event that such claims occur. Even if the case is dismissed in the end, having EPLI could possibly save you thousands of dollars in lawyer fees and related court costs. As EPLI suits are some of the most expensive claims that a business can face, it is wise to invest in this insurance before hiring your first employee and certainly before growing your workforce.
Who Should Consider Getting EPLI?
No employer even anticipates an employee lawsuit. However, if the time ever arrives you want to be prepared. Maintaining EPLI is an effective way to manage your risk and prevent such incidents from putting your business in jeopardy. Remember it just takes one bitter job applicant or disgruntled employee to wreak havoc on your business and cause you to experience financial ruin. Employment practices liability insurance coverage generally kicks in as soon as the allegations of wrongdoing are made, meaning all costs associated with the claim are controlled from the very start.
There are a number of factors you will want to consider when deciding whether or not EPLI is right for your business. These factors typically include the size of your business, the level of stress involved in your employees’ daily work, your employee turnover rate, and the leadership of your company. Although EPLI is not a requirement for companies, it is a wise choice given the volume of employment practices litigation. For many small to mid-sized businesses, the costs of defending employment lawsuits can be substantial sometimes reaching as high as six or seven figures. EPLI provides employers with the peace of mind that they are covered against employment lawsuits.
What Is Not Covered Under EPLI?
It is important to understand that while most employee-based claims and lawsuits are covered under EPLI, some situations are not protected. This includes any dishonest or intentional acts committed by your business. EPLI also does not usually cover employee claims that involve property damage or bodily injury. Instead, these types of employee claims would generally fall under your company’s general liability coverage. General liability insurance, also referred to as business liability insurance, protects your business from third party claims of property damage, as well as claims of bodily injuries and any associated costs.
How Much Does EPLI Cost?
At first, many business owners are concerned about the cost of EPLI. However, most find that the fair price of the insurance is well-worth the peace of mind it brings. The cost of coverage will ultimately depend on a number of business-related factors, such as the industry your business is in and the number of employees you have. Other factors may also come into play, such as whether or not your business has been sued in the past for poor employment practices. Under EPLI, your policy will reimburse your company for any costs resulting from defending a lawsuit in court, as well as for any settlements.
As the cost of EPLI is based on various business factors, there are ways you can possibly achieve lower insurance costs. By implementing some simple risk management tips into your business, you can significantly reduce your workplace EPLI loss exposure. When hiring, be sure to create clear and concise job descriptions to prevent misunderstandings. You will also want to access and adjust your hiring procedures and maintain fair and consistent management policies and procedures. Provide management and employees with initial and ongoing training to not only boost performance but to also create a respectful and tolerant work environment.
Why Consult With an Insurance Broker?
If you are unfamiliar with EPLI or are not sure if your business really needs it, talk to an insurance broker in your area. Insurance brokers act as a middleman between customers and the insurance companies. With the assistance of a broker, you can obtain information and advice from a trusted expert in the field. Many insurance brokers are also available to secure better pricing then if you were to buy insurance direct.
Your insurance broker will act as your advocate, helping you to retrieve the best coverage deals out there. They are also there to help you through a claim situation if one should arise. Do not wait until an employee makes a claim before getting EPLI. Learn more about employment practices liability insurance and what it can do for you by contacting MFE Insurance Brokerage in Los Angeles, California.