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EMPLOYMENT PRACTICES LIABILITY INSURANCE (EPLI)

Introduction: EPLI

Introduction: EPLI

Employment Practices Liability Insurance (EPLI) protects your client and their business leaders, such as directors and officers, against employee-initiated lawsuits alleging wrongful acts in the employment process. The covered lawsuits can be brought by prospective, current, or former employees who claim their civil rights were violated or they were required to work in a hostile environment.

EPLI Basics

EPLI Basics

Employment Practices Liability Insurance protects your client when an employee or a job candidate accuses them of unfair employment practices, such as wrongful termination, discrimination, or sexual harassment. Defending against these claims can be expensive, and your client may be able to use their EPLI to cover the investigation, defense, and claim payments.

For example, if a former employee claims your client fired her because of she is over 40, an EPLI policy may pay their attorney fees, court costs, and judgments or settlements (up to policy limits). Some policies may protect your client even if the claims are meritless.

Here are some other things to keep in mind:

    Your client and their business are protected by an EPLI policy. Additionally, a policy can include their directors, officers, management personnel, and employees from claims of unfair employment practices. Some policies only cover full-time employees, but some may include independent contractors and part-time, seasonal, or leased employees. Your client can purchase EPLI two ways. It can be purchased as a standalone policy or it can part of a management liability package. However, when it's part of a management liability package, EPLI may have more limits and exclusions, leaving your client exposed.

Though it offers lawsuit protection, Employment Practices Liability Insurance is different from General Liability and Professional Liability Insurance. Those policies protect your client against lawsuits initiated by non-employees. EPLI focuses on the employer-employee relationship. This makes it an essential coverage for clients with employees.

What Does EPLI Cover?

What Does EPLI Cover?

The Equal Employment Opportunity Commission interprets and enforces the federal laws that govern your client's liability to their employees, but there are also state statutes that apply. In general, EPL Insurance covers..

  • Wrongful termination.
  • Workplace discrimination.
  • Sexual harassment.
  • Infliction of emotional distress.
  • Invasion of privacy.
  • Deprivation of career opportunities.
  • Wrongful discipline or demotion.

Some policies limit coverage during certain events, such as a major workforce reduction, a merger, or an acquisition. They typically don't cover intentional or criminal acts, either.

Important Facts about EPLI

Important Facts about EPLI

Employment Practices Liability Insurance is a necessary safeguard for most of your small-business owning clients. Here are some of the key details that will help you serve them better:

Claims-made vs. Occurrence

Claims-made vs. Occurrence

EPLI can be "claims-made" or "occurrence" coverage. Claims-made coverage is the more common policy. As you probably already know, you client's policy must be active when the incident occurred and when the claim is filed. The only time this isn't true is if the policy has a retroactive date, which allows coverage for an incident prior to the start of the policy.

When EPLI is set up on an "occurrence" basis, your client is covered for events that happen during the policy period regardless of when the claim is filed. Even when a claim is reported to the carrier outside of the policy period, if the event occurred while the coverage was in effect, your client is covered.

Shrinking Limits Provisions

Shrinking Limits Provisions

Employment Practices Liability forms often contain a "shrinking limits" provision. Also known as a "defense within limits" provision, it stipulates that your client's defense costs reduce the amount available for judgments and settlements. Conceivably, your client's defense costs could reduce funds to the extent that their policy is terminated and they are exposed to risk.