Definition of Employment Practices Liability Insurance (EPLI) in Business Insurance

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Employment Practices Liability Insurance (EPLI)

Unfortunately, not every company is a happy family. In some cases, employees feel harassed or believe they were improperly terminated. These workers can sue the company, while they work there or afterward, and request reparations.

After review, a business might determine the employee was unjustifiably harassed or fired. They could reimburse the individual from their own budget. However, that could remove a huge chunk of money. Instead, they rely on a form of liability insurance that can cover legal costs and judgment payout. It’s known as employment practices liability insurance (EPLI).

How EPLI Works

EPLI covers a business when an employee claims their legal rights were violated by their colleagues or management. This form of liability insurance is used by both small businesses and large corporations. It’s either a stand-alone contract or part of a business owner’s policy (BOP).

When a company invests in EPLI, they’re granted coverage for several employee-based situations. These include:

  • Sexual discrimination or harassment

  • Wrongful termination or breach of contract

  • Improper disciplinary actions

  • Hiring discrimination

  • Failure to promote or reassign

  • Physical or emotional distress

Coverage and Cost

An EPLI policy covers costs related to legal actions and retribution. Like other insurance contracts, there’s an aggregate limit to the coverage. Once this is met during the policy year, the insurer no longer covers payments.

The cost of an EPLI policy depends on different factors. One is the type of business and the number of employees. Another is the number of previous claims made against the company. If a loss runs report reveals this to be a large number, the insurer might charge a higher premium for the business.

Avoiding EPLI Claims

While coverage is welcome, an EPLI policy shouldn’t be utilized on a regular basis to cover complaints. If a company is near the cap of its coverage, this means things probably need to change within the business environment.

Thus, to avoid EPLI claims, companies should consider the following:

  • Revise screening and hiring processes to minimize the potential for discrimination.

  • Train employees on proper interactions and conflict resolution.

  • At the time of hiring and throughout the year, teach employees on the required steps to file sexual discrimination complaints against colleagues and supervisors.

  • Create procedures to document the necessary steps taken to resolve or escalate disputes.