Why Your Business May Need Employment Practices Liability Insurance (EPLI) Coverage

By: Minh Luong and Ashna Gorajia

Employment Practices Liability Insurance (EPLI) is an insurance policy available to business owners and companies that protects them against lawsuits from potential, current, and past employees alleging that their legal rights have been violated. These policies reimburse companies for costs incurred to defend a lawsuit in court and to respond to judgements and settlements.

This additional coverage is usually added onto a business owner’s policy. Although it is not mandatory, it is usually highly recommended. EPLI covers not only the business, but also all those who work within the business. This includes all officers, directors, management, and general employees.

The claims filed most commonly include wrongful termination, discrimination, retaliation, and sexual harassment, but EPLI also protects against defamation, breech of employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of career opportunity, wrongful infliction of emotional distress, mismanagement of employee benefits, negligent supervision of employees, illegal background check, invasion of privacy, and pregnancy and lactation accommodation. Insurance companies commonly cover claims related to Title VII of the Civil Rights Act.

EPLI polies are almost always claim-made policies, which means that you must already have the insurance when a claim is made to use it. Once you have it, the policy itself will have a duty to reimburse or a duty to defend where the former means that the employer can choose its counsel, and the latter means that the insurance company will appoint the council to represent the employer. Additionally, the insurance company will choose for you if a case is settled or goes to trial, allowing them to make the decision in the case of a lawsuit.

For most companies, the cost of this insurance relies on the type of business covered, the overall number of employees within the business, and other risk factors such as previous employment practices and lawsuits.

EPLI does not cover punitive damages or claims for criminal acts. Additionally, there are some large claims that the insurance generally will not cover. These are usually claims on the violations of the National Labor Relations Act (NLRA), the Occupational Safety and Health Act (OSHA), the Worker Adjustment and Retraining Notification (WARN) Act, the Employee Retirement Income Security Act (ERISA), and claims relating to state hour and wage laws.

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For help deciding which insurance coverage to get for your company, contact your Chugh, LLP legal professional.