Employment Practices Liability Insurance (EPLI), provides coverage for alleged wrongful acts resulting from the employment process. Reported claims appear to be on the rise with any size company so all businesses that have employees should consider this valuable coverage. Many companies are now making this coverage available through an endorsement on the Business Owners Policy, or it can be purchased on a stand-alone basis.
EPLI claims are on the rise as ongoing developments at the EEOC, court decisions, and legislation continues to increase exposure for employers. According to Jury Award Trends and Statistics, published by Westlaw, companies with as few as 100 employees should expect an employment practices claim at least once every three years.
Typical employee lawsuits include claims of:
- Wrongful discipline
- Sexual harassment
- Wrongful termination
- Breach of employment contract
- Failure to promote or employ
- Negligent evaluation
- Infliction of emotional distress
- Benefits plan mismanagement
- Career opportunity deprivation
EPLI premiums are based on several underwriting factors, including but not limited to, business industry, number of employees, mitigation measures, and claims history.
EPLI will reimburse your company for the costs of defending your lawsuit, settlement agreements, and court judgments. The legal costs are paid whether or not your company prevails in court. The policy will cover officers and directors, all levels of management and staff members. Many policies contain a provision where the defense costs are part of the limit rather than outside of it so companies should take this into consideration when selecting their limit of coverage.
Mitigating Risk Exposure
Larger companies typically employ a trained and experienced HR manager to put practices in place to mitigate exposure, however, most insurance carriers will make best practice publications available to the insured at no charge. Typical mitigation practices are:
- Implement effective hiring, screening and education programs
- Put company policies in employee handbooks that are clear to everyone
- Post company policies in conspicuous areas throughout the workplace
- Create a process for reporting any alleged violation
- Document every complaint and the steps the company is taking to resolve disputes
If your company cannot fund an HR Manager, you may wish to outsource these responsibilities to a reputable HR firm to assist in overseeing your EPLI best practices program. Always consult with an experienced agent or broker to get help with determining your company’s exposure and finding the most economical means of mitigation.