With the rapid rise of employment-related lawsuits, the demand for Employment Practices Liability Insurance (EPLI) has grown dramatically in recent years. It protects businesses from claims by workers who feel that their legal rights as employees were violated.
Almost all EPLI policies cover the three largest areas: discrimination, sexual harassment, and wrongful employment (both hiring and firing). Some policies also provide coverage for wrongful discipline; breach of contract (both expressed and implied); negligent supervision, evaluation, or promotion; emotional distress; invasion of privacy; drug testing; mental anguish; slander; libel; and mismanagement of employee benefit plans.
Most policies cover legal costs in addition to claim settlements (up to specified limits). Coverage typically applies even in the event of groundless or fraudulent claims.
Willful and intentional acts and criminal misconduct are usually excluded from EPLI policies, and most EPLI policies don’t cover punitive damages or civil punitive penalties.
Who Needs Employment Practices Insurance?
Over half of all lawsuits filed in Federal court alleging civil violations are filed by employees against their employers. Such claims were much less common ten years ago. Some governmental legislative acts (like the Americans with Disabilities Act and the Family Medical Leave Act) have heightened awareness of wrongful employment practices and have contributed to the increasing number of claims.
Large firms may be most at risk, but no employer is immune from employee lawsuits. Small business owners may feel safe if they know and trust their employees, but need to be reminded that claims could be filed by former, current, or even prospective employees.
Things To Think About
The cost of EPLI coverage is based on number of employees, location, type of business, industry, employment practices, past lossexperience, and other operating characteristics. Companies can minimize their risk with consistent emphasis on fair and equitable hiring, discipline, review, and termination policies; careful screening of prospective employees; meticulous documentation of incidents; comprehensive employee training on these matters; and clear communication of corporate policies in employee handbooks, newsletters, bulletin board postings, websites, etc.
Compare policies to find the broadest coverage available for the price. Find out if the policy covers applicants, part-time and seasonal workers, leased workers, and independent contractors. How about board members? Volunteers? Are there exclusions for downsizing or other events which may lead to employee discontent?