Employment Practices Liability Insurance for Non-Profits

You’re one of the good guys. You operate one of America’s 1.5 million non-profits. So nobody would want to sue you. Right? Wrong. Very wrong. And if you’re one of the many small non-profits operating on a shoestring and hanging on by a thread in this crummy economy, it only takes one disgruntled employee with a claim of wrongful termination, harassment or improper treatment to put an end to all your good works. You need to know about Employment Practices Liability Insurance for Non-Profits.

First of all, if you think you don’t need the added expense of EPLI because your staff are all volunteers, think again. Interns, volunteers and unpaid help may not be official employees, but if they think you or your staff have discriminated in the selection process, they can sue you under Title VII of the Civil Rights Act of 1964, especially if you have a history of hiring paid workers from your volunteer pool.  In fact, statistics show that you’re more likely to be face suits for breaches of employment practices than for property or general liability.

Second of all, this is not a rare event any more. Non-Profits, especially small ones,  are increasingly targeted by aggressive plaintiffs and their lawyers. Some analysts suggest that’s because you’re perceived as less likely to want to spend money mounting a defense. In other words, you’re more likely to just settle. More than 25% of the civil cases in our courts are employment related and the number of employment discrimination and harassment suits filed with the EEOC have doubled since 2005. The average settlement for employment practices liability claims are around $40,000. Toss in compensation for the employee’s related losses and the average goes up to $218,000. You might even end up among the 10% of wrongful termination awards that top $1 million. There’s goes your operating budget!

A good EPLI insurance policy for your non-profit will cover your defense expenses. Just knowing that you have the coverage and the wherewithal to fight back may discourage nuisance suits. Depending on your policy, your EPLI carrier may even reserve the right to select the defending attorney. That’s a good thing, because you’ll be more likely to be represented by counsel with extensive experience with EPLI suits.

When looking for EPLI for Non-Profits quotes, pay careful attention to the Exclusions and Limitations of the policies you’re considering. Be on the lookout for definitions of insured events that limit coverage to listed federal or state employment laws. Such a limitation could leave you exposed to if you operate in a location with broader definitions. You also want to be sure you’re covered beyond the standard wrongful termination, discrimination, breach of contract and harassment risks. Look for an EPLI policy that also covers claims like retaliation, defamation, invasion of privacy and failure to promote. Finally, review the extent of the defense coverage provided.

While you’re shopping for EPLI quotes for Non-Profits, you can also take some preventive measures. Be sure that anyone who deals with selecting or managing your employees and volunteers knows not to discriminate on the basis of race, religion, ability, sex or age.


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