One question we hear frequently from our corporate clients is: “Do we really need Employment Practices Liability Insurance?” The answer is yes – EPLI is no longer optional. It’s an insurance necessity.
What is EPLI?
Employment Practices Liability Insurance (EPLI) is a type of insurance separate and apart from comprehensive general liability insurance and is expressly designed to protect businesses from the financial fallout of employment-related claims. These claims typically arise from allegations of discrimination, harassment, wrongful termination, retaliation, or other violations of state or federal employment law.
Why EPLI is a Necessity
Coverage Beyond General Liability: Standard commercial general liability (CGL) insurance policies do not cover claims arising from or related to employment decisions such as hiring, firing, promotions, or employee discipline. EPLI is specifically designed to cover these gaps in coverage, providing essential protection where CGL coverage stops.
Rising Employment Litigation: Employment claims are on the rise and defending them is expensive. The average cost to defend and settle a single employment claim can range from $160,000 to over $300,000. Annual premiums for EPLI, on the other hand, typically range from $2,500 to $4,000 for small businesses. Even cases that settle early can cost tens of thousands of dollars. Adding to the risk, many employment statutes include fee-shifting awards, meaning that if the employee wins at trial (even a small “nuisance value” award) the employer may be ordered to pay all the plaintiff’s legal fees, which are often higher than the alleged damages. EPLI helps absorb both defense costs and potential award/settlement, ensuring the company is not left to front the entire bill.
Protecting Leadership and the Company – EPLI coverage typically extends to directors, officers, and key decision-makers, shielding them from liability in employment-related claims. These added protections can be critical in attracting and retaining top talent at the executive level who want assurances of protection.
Act Now to Protect Your Business
It is important to remember that EPLI only covers claims made after the policy is in place. If an employer waits to secure coverage until an employee has already raised concerns or filed a charge or complaint, those allegations will almost always be excluded as a “pre-existing” claim. Even if the claims occur during the coverage period, if there are allegations that predate the coverage period the carrier may have the ability to disclaim coverage. This is why employers should obtain EPLI coverage now, before issues arise, or risk a potential claim being excluded from coverage.
Make EPLI Part of Your Insurance Portfolio
EPLI is more than a “nice-to-have” policy, it is a strategic safeguard for any employer. Obtaining coverage proactively – before allegations arise – is essential to mitigate risk and ensure your business is fully protected.
We recommend reviewing your full insurance portfolio, including your CGL, D&O, Business Interruption, and Workers’ Compensation policies, to ensure EPLI coverage is in place and sufficient for your organization’s needs. Taking this step proactively can protect your business, your leadership team, and your bottom line from the significant costs associated with employment-related claims.
For more information on compliance, please contact the OlenderFeldman Employment Practices Group here.
