15 Sep What Is Employment Practices Liability Insurance?
Employment practices liability insurance, or EPLI, is a certain kind of specialized insurance that serves the purpose of safeguarding businesses that are facing various types of employment-related claims.
According to information available on the Insurance Information Institute’s website, it is noted that “some insurers provide this coverage as an endorsement to their [business owners’] policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a [stand-alone] coverage.”
In the eyes of insurance experts, small businesses are especially susceptible to being subjected to EPLI claims, making EPLI all the more important for those who own and operate small businesses.
In fact, of all EPLI claims, approximately 41% of them are brought against businesses that employ anywhere from 15 to 100 employees in total. Consequently, EPLI claims can create monstrous disruptions for small businesses and cause devastating impacts in various ways, including in the form of financial harm.
What does EPLI cover?
Generally speaking, EPLI is a way by which businesses can be reimbursed for losses that were incurred as the result of the business having to defend itself against employee lawsuits.
It is also a way by which businesses can receive reimbursement or compensation as a result of judgments and settlements. Per the III’s website, EPLI can also “[cover] legal costs, whether your company wins or loses the suit.”
These are some examples of employment-related claims typically covered by EPLI:
- Discrimination.
- Improper management of employee benefit plans.
- Negligent performance evaluations.
- Retaliation.
- Violation of employment contract.
- Wrongful discipline.
- Wrongful failure to employ or promote.
- Wrongful infliction of emotional distress.
- Wrongful termination.
What is not covered by EPLI?
An SHRM article has stated that EPLI tends to exclude wage and hour claims, even those that are associated with the Fair Labor Standards Act. Even so, the employer may be able to recover “their attorney fees and defense costs, even for wage and hour claims, and perhaps more,” though the specifics will fully depend on the specific coverage terms set forth by EPLI.
It is in employers’ best interests to refrain from assuming that all the related costs will be covered by the EPLI policy. Within the aforementioned SHRM article, an expert is quoted as stating that a number of businesses incorrectly believe that EPLI will cover every single type of workplace litigation, no matter the circumstances.
However, in situations where both wage and hour claims are included under EPLI, the coverage from said policy is often restricted to defense costs alone. Similarly, it would not then extend to settlements or judgments. In most cases, insurers make note within the policy of the specific types of claims that are explicitly excluded from their EPLI coverage options.
These types of claims may include any of the following:
- Disputes about workers’ compensation claims.
- Intentional wrongdoing by the employer.
- Litigation pertaining to unemployment benefits.
- Punitive damages.
- Wages the employer should have paid.
How much does EPLI coverage cost?
The costs associated with EPLI coverage will depend on the number of employees and the employer’s industry in addition to other risk factors, such as the claims history and turnover rates as well.
Research has shown that it’s not uncommon for small or midsize businesses to expect to pay anywhere from $800 to $3,000 per year for annual EPLI coverage. In the same vein, EPLI policy limits often fall within the range of $100,000 at a minimum to $1 million at most, though the price points can be less than or greater than these averages as well.
Considerations
The rate of employment lawsuits is currently on the rise. As a result, EPLI coverage is becoming more and more popular. However, the simple act of having EPLI coverage does not automatically absolve employers from the responsibilities of adopting and maintaining strong employment practices.
If companies are founded with a weak HR infrastructure, insurers are far more likely to view said businesses as being greater risks to them. If this happens, they might decide to deny EPLI coverage for you altogether. Alternatively, if they are worried, they may choose to offer EPLI coverage to you but charge you higher rates.
Also, make note of the fact that EPLI is not available in every state nor is it an option for every type of business. If you’re interested in securing EPLI, schedule an appointment to consult with an insurance broker today.
Original content by © IndustryNewsletters. All Rights Reserved. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.