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Employment Practices Liability Insurance
Employment Practices Liability Insurance, also known as EPLI, is a type of liability insurance that covers companies against claims made by employees alleging violations of their legal rights as employees. In today’s litigious environment, companies of all sizes and across all industries face the risk of costly claims related to discrimination, harassment, wrongful termination, and other employment-related issues. EPLI insurance responds to these allegations, providing essential financial protection.
What Is EPL Insurance?
Known primarily as Employment Practices Liability Insurance (EPLI), this coverage protects companies from liability claims made by current, former, or even prospective employees. While both EPLI and general liability insurance safeguard the organization against third-party mishaps, the two policies focus on different aspects of protection.
For example, an EPLI policy focuses solely on claims related to employment practices, such as wrongful termination or discrimination. This is distinct from general liability insurance, which covers bodily injury and property damage. Furthermore, EPLI covers liability arising from a wide range of workplace issues, including but not limited to, harassment, failure to promote, or retaliation.
Consider an employee who alleges they were unfairly passed over for a promotion due to their age, leading to a costly lawsuit. EPLI insurance would respond to this particular claim, whereas general liability would not, since there was no physical injury or property damage.
Employment Practices Liability Coverage
Understandably, Employment Practices Liability Insurance benefits nearly every company with employees, but especially those in fast-growing, dynamic industries. Workplace claims can result in substantial legal and court costs, and EPLI insurance provides a critical layer of financial protection.
Who Needs EPL Insurance Coverage?
Any company that employs or plans to employ others—full-time, part-time, temporary, or even contractors—runs the risk that a current, former, or prospective employee will file a claim alleging a violation of their rights.
The types of operations that need this coverage to mitigate their risk are almost too many to count:
Startups
New companies that are rapidly scaling and hiring their first employees.
Retail & Hospitality
Businesses with a high turnover rate and a large number of employees.
Professional Services
Firms offering accounting, legal, or consulting services.
Technology Companies
Tech firms with diverse workforces and remote employees.
Non-Profits
Organizations with volunteers and staff who are not paid on a traditional basis.
What Does EPL Insurance Cover?
You will have to consult your policy documents to confirm exactly what coverage your policy provides, but here are a few scenarios that typically would and would not be covered. You can read more about what EPLI covers here.
Defense Costs
EPLI will often help cover court costs and legal fees resulting from a claim made against you or your business by an employee.
Settlement and Judgments
If a case results in a settlement or a judgment is awarded against your company, EPLI may provide coverage.
Wrongful Termination
EPLI typically covers claims from an employee alleging they were unfairly fired.
Discrimination
Policies often cover claims related to discrimination based on age, gender, race, religion, disability, or other protected characteristics.
Harassment
This coverage can respond to claims of sexual harassment, hostile work environment, or other forms of workplace harassment.
Retaliation
If an employee alleges that they faced negative consequences for reporting a workplace issue, EPLI may cover the resulting claim.
EPL Insurance Policy
Employment Practices Liability Insurance covers:
How Can I Manage My EPLI Policy and Risks?
Before discussing managing this particular policy, let’s explore its foundation more in-depth. Employment Practices Liability Insurance is often purchased as a standalone policy but is sometimes bundled with Directors & Officers (D&O) coverage.
Understanding that other insurance policies often work hand-in-hand with EPLI is critical. For example, EPLI and Directors & Officers (D&O) coverages are often packaged together since many employee-related lawsuits name corporate officers personally. Review these coverage options with a trusted commercial insurance broker to ensure all exposures are covered.
If an employee claims that your company’s actions violated their rights under employment law, EPLI will step in to protect you from the lawsuit. The policy does this by paying your defense costs, settlements, and judgments against your company.
What Does an EPLI Policy Not Cover?
Similar to many other insurance policies, Employment Practices Liability Insurance coverage has exclusions. For example, EPL insurance doesn’t cover the following claims:
Remember, EPLI focuses purely on liability related to employment practices, not bodily injury or property damage, which is covered by general liability and workers’ compensation policies.
EPL Insurance Cost
As with most commercial insurance policies, the cost of an EPLI policy depends on several factors: location, claims history, and policy limits, to name a few. However, the following are some other main points insurance carriers will consider when calculating a premium.
EPL Insurance Cost Factors
More often than not, the premium is a function of the number of employees. Changes in your employee count will often be the driving factor for increases or decreases in renewal costs.
How carriers determine premiums depends entirely on the industry, for example:
- High-Growth Tech Companies Premiums may look at employee count in conjunction with rapid hiring goals and remote work policies.
- Retail & Hospitality The number of part-time and seasonal employees will be a major factor in determining premiums.
- Professional Services In addition to headcount, the nature of services provided and client-facing roles will be considered.
Additionally, many major commercial insurers will customize an EPLI policy, which impacts the premium. That said, some of the most prominent enhancements include:
- Various defense cost reimbursement
- Wage and hour claim defense
- Third-party liability for claims by customers or vendors
- Deposition expense reimbursement
- Various expanded limits
EPL Insurance Claim Examples
A mid-sized tech startup, InnovateNow, hires a new manager who is accused by a long-time employee of passing them over for a promotion due to their age. The employee files a lawsuit alleging age discrimination. InnovateNow’s EPL policy would cover the legal defense costs and any potential settlement or judgment.
A customer service representative at a national retail chain files a claim against her manager, alleging a hostile work environment and verbal harassment. The company’s EPL policy would cover the legal costs to defend the manager and the company against the harassment claim.
A former employee of a small consulting firm alleges they were fired in retaliation for reporting a safety violation to management. The employee files a wrongful termination lawsuit. The consulting firm’s EPL insurance would step in to cover the legal fees and other costs associated with defending the claim.
A mid-sized tech startup, InnovateNow, hires a new manager who is accused by a long-time employee of passing them over for a promotion due to their age. The employee files a lawsuit alleging age discrimination. InnovateNow’s EPL policy would cover the legal defense costs and any potential settlement or judgment.
A customer service representative at a national retail chain files a claim against her manager, alleging a hostile work environment and verbal harassment. The company’s EPL policy would cover the legal costs to defend the manager and the company against the harassment claim.
A former employee of a small consulting firm alleges they were fired in retaliation for reporting a safety violation to management. The employee files a wrongful termination lawsuit. The consulting firm’s EPL insurance would step in to cover the legal fees and other costs associated with defending the claim.
Insurance Brokers For EPL Insurance
Founder Shield is a data-driven insurance brokerage serving high-growth, innovative industries. We have a passion for creating and developing innovative risk management products across emerging industries and work hand in hand with clients and underwriters to ensure transparency, efficiency, and reliability every step of the way. Our team has specialized expertise and experience in providing EPL insurance services.
We partner with the leading professional liability insurance carriers to craft tailored risk management programs for public companies and venture-backed companies preparing for funding rounds. With EPL insurance a major budget item, we understand that companies look for new and creative solutions to help manage increasing costs while also securing best-in-class coverage.
EPL Insurance FAQs
What Is Employment Practices Liability Insurance Rated On?
• number of employees and compensation: the more employees you have, the greater the likelihood of one submitting an employment-related claim. Well-paid employees make claims for...
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What Are Common Exclusions On an EPL Insurance Policy?
Claims that should be covered by other insurance These are the particularly important in EPLI because of the policy’s “inclusion by exclusion” philosophy. • Bodily...
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What Are Common Coverage Enhancements On an EPL Insurance Policy?
Wage & Hour EPLI will normally not cover disputes related to the non-payment of salary, overtime, and benefits. These claims are too common for every...
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