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What businesses need to consider purchasing Employment Practices Liability Insurance?


Who should consider purchasing Employment Practices Liability Insurance?

It seems more and more we hear about employees asserting discrimination and unfair employment practices by their employers. If you don’t believe me, just turn on NPR for a little while. As these allegations increase, so does the need for employers to protect themselves.  This can be done with Employment Practices Liability Insurance (EPLI).

EPLI is intended to protect employers from claims brought by employees (and others).  Claims could include wrongful termination, discrimination, sexual harassment, breach of contract, emotional distress, and labor law violation suits initiated by employees. Claims for EPL are typically excluded from a general liability policy. Some business owner’s policies however, do have nominal amounts of  coverage built into their coverage package.  It’s usually not much though, commonly $25,000 with an option to increase coverage from there.

What should I consider when purchasing Employment Practices Liability Insurance?

The first question you have to ask is whether you currently have EPL coverage or not. EPL is often provided on a claims made basis. So if you do have coverage you’ll want to make sure that prior acts (acts that occurred before the current policy term) are covered.

You should also consider who the coverage protects you from. Employee is more of a nebulous term than previously.  Are “1099 employees” considered employees? What about subcontractors? What if a vendor alleges sexual harassment?  Your broker should be able to walk you through the terms of  your policy.

So how much Employment Practices Liability insurance do I need?

The size of your company and your payroll should play heavily your equation when considering how much EPLI to carry. Obviously the more employees you have, the more likelihood that someone will feel slighted. Just by sheer volume your chance of a claim rises.   Having more employees also lends itself to a group or class of employees banding together to bring suit on common grounds.

Payroll often times will play into the eventual judgment calculation. For instance, someone who is wrongfully terminated may ask for a multiplier of their pay as compensation. Therefor an employee with a larger salary could receive a larger judgment in the end.

Other factors to consider.

Finally, talk to your agent of broker about your industry. Are you in a high turnover industry? Are your employees predominantly male or predominantly female? Have you been forced to downsize your labor force? Some business owners might find that they are comfortable having a minimal amount of coverage just in case. Others may want to reach out to specialty markets and try to purchase larger more inclusive policies.  Either way, we’d be happy to help if you have questions!