In Business Insurance

What is Employment Practices Liability Insurance?

Employment Practices Liability Insurance (EPLI) is a coverage designed to protect the insured against the risks associated with running a business. EPLI policies cover a range of risks such as wrongful termination, sexual harassment, contract violations, and wage and hour law violations. In a world where courts tend to favor the employee, whether they are right or wrong, an EPL policy can be the difference between keeping a business open or not.


Why Have EPLI?

Employee discharge is a big risk for an employer. While an employer has the right to hire and fire and will, an employee can threaten to sue for wrongful termination. Even if the employer is innocent, the legal fees to prove it can add up quickly so the easiest way is to simply settle the suit. Unfortunately, the employer ends up losing even if they are innocent. If any employment practices case is brought to court, the employee will win over 60% of the time. While some states have statutes or specific laws to follow to make a case, there is still a risk present.


What Are The Costs Associated With Employment Practices Risks?

The median compensatory award to employees is $325,000 and 40% of claims are brought against businesses with fewer than 100 employees. There are ways to avoid having to worry about these risks, most of which involve a lawyer or legal consultant. A firm can have a lawyer on retainer in case of a suit, or it can consult an employment law firm to see what kind of preventative steps need to be taken prior to or in the event of a suit. But a far cheaper option would be to purchase an EPLI policy.


EPLI Claims Example –¬†Sexual Harassment

The receptionist of a fitness center alleged her manager repeatedly sexually harassed her by making verbal comments and making unwelcomed advances. Although no one directly witnessed the alleged harassment, the manager had a history of inappropriate behavior alleged by other employees. Constructively discharged, the claimant sought damages for front pay, back pay, compensatory damages, attorney fees and other relief. The case settled for just $4,850 after $26,000 was spent in defense costs.

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