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What is employment practices liability insurance (EPLI)?

Employment Practices Liability Insurance (EPLI) coverage protects businesses from lawsuits arising out of the employment process. In the last few years, EPLI claims are being filed much more frequently.

Have you ever had to let someone go from the job? If you've had to discharge an employee, then there is potential that it may result in litigation. EPLI policies cover claims by former employees. The policies will help cover legal costs, whether your company wins or loses the suit.

Can I get a claims scenario?

  • You decide to let go an older employee who has been slacking off and not meeting his sales quotas. A few months later, you get served legal papers for wrongful termination based on age discrimination. Even though his claims are completely unfounded, there is not enough documentation proving he was a poor performer, and you end up settling for $630,000.

  • An employee refuses to serve a Chinese woman and shouts racial epithets at her. This is not how you trained your staff. There are several witnesses. The victim sues your restaurant for racial discrimination based on the actions of one individual employee. A settlement of $48,000 is reached.

  • A claim is brought by a former employee for gender discrimination – she alleges that her male colleagues all received raises, whereas she was passed over for a promotion due to her sex. Defense costs alone amount to over $100,000.

Clearly, things happen, even if you have all the necessary controls in place.

Before you pick up the phone to call us, there are things to note:

  • EPLI can be costly. In some cases, the premium is just as if not more expensive than your business owners insurance policy. Small business owners must weigh the risks and costs very carefully. Review your finances to see if this coverage is feasible for you.

  • When you’re ready to apply for EPLI, prepare a copy of your financials and your employment handbook in advance (many EPLI carriers require this at the time of application).

  • EPLI is occasionally available as an add-on coverage on your business owners insurance policy, depending on your carrier; however, keep in mind that it’s typically limited to first-party EPLI claims. Stand alone EPLI policies, on the other hand, are often able to offer both first- and third-party coverage.