EPLI Insurance Coverage in California

Sadly, employment-related lawsuits are becoming more and more common, especially in California.

Even if your company is not guilty, the cost and time allocated to these lawsuits can be detrimental to your business.

That is why it is important to have EPLI coverage, to protect your company against these claims and help cover the legal fees that come with them.

What is EPLI?

Employment Practices Liability Insurance (EPLI) is an insurance policy that protects your business against employment-related lawsuits made by potential hires, current employees, and former employees. These claims can vary from discrimination, sexual harrasment, or even wrongful termination.

Typically, EPLI is sold as additional coverage that can be added on to an existing business owners policy. Although EPLI is not a mandatory policy for businesses to have, it is highly recommended.

What Does EPLI Cover?
Employment Practices Liability Insurance policies cover a variety of situations that are not typically covered through a standard business owner’s insurance policy.

Discrimination

The unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, sex, religion, etc.

Harassment

The Equal Employment Opportunity Commision definition of “harassment” is unwelcome conduct that is severe or pervasive enough to create a work environment that is intimidating, hostile, or abusive.

Harassment can come from managers, supervisors, coworkers, and even non-employees.

Retaliation

A negative action that a company takes against an employee for engaging in legally protected activity. For example, firing or demoting an employee after filing a lawsuit against the company. According to the EEOC, retaliation is the most common claim against employers making up 53.8% of charges filed against employers in 2019.

Wrongful Termination

Firing an employee for an illegal reason such as a disability, pregnancy, gender, race, etc.

Defamation

Committing libel or slander against a person.

Who Does Employment Practices Liability Insurance Cover?
Employment Practices Liability Insurance provides coverage for your business and all of your employees. Not only is your company as a whole held accountable for employment related practices but specific employees involved in the claim are held accountable as well.

Most EPLI claims are filed due to an employee getting fired or let go from a company. Typically, high-level managers and supervisors are the people cutting ties with employees for whatever reason they may have. Since they are the final decision maker, they are held accountable for their actions and can be charged directly. Not only can this take a toll on a manager or supervisor mentally, but financially as well.

Employment Practices Liability Coverage helps protect employees financially and mentally throughout this difficult process.

How Much Does Employment Practices Liability Insurance Cost?
The cost for an EPLI policy varies based on the company that is requesting coverage and the amount of coverage they are seeking. EPLI policy limits range from $100,000 to $1,000,000. Obviously the cost of a policy that covers $1,000,000 will be more expensive than a policy that covers up to $100,000.

Other factors that affect the cost of an EPLI Policy Include:

• Number of employees
• Company’s financial worth
• Turnover rates
• Hiring and firing procedures
• Type of business
• History of legal action against company

Why is EPLI Important For Your Business?
There were over 72,000 charges filed with the Equal Employment Opportunity Commision in 2019 alone. That amount isn’t even including the claims filed with the State or the Fair Employment Practices Agencies. These cases do happen and your company needs to be prepared.

Whether your company is in the wrong or false allegations are being made, these lawsuits are not cheap. If they escalate to court, the process can drag on for much longer increasing the cost for attorneys. The average employment claims lasts 300 days before it is resolved.

Employee related lawsuits and allegations are typically excluded from standard liability coverage and policies. Without an EPLI policy, you take on 100% of the risk and costs if a claim is filed against your company.

The average cost of defending an employment law case is $160,000. This cost can drain small businesses funds quickly and possibly sink the business altogether. An Employment Practices Liability Insurance policy can cover these costs and more, allowing you to focus on growing your business.

Why EPL Insurance is Important for Small Businesses

These costs can be crippling to a small business with a tight budget. Surprisingly, 40% of EPLI lawsuits are filed against companies with less than 100 employees.

Nobody expects this to happen at their company in the early stages, but it does. The only thing you can do as a small business is to be prepared.

Why EPL Insurance is Important for Big Businesses

In big business, there are a lot more factors that are out of your control on a daily basis. There are more employees which increases the risk of unethical behavior at the workplace.

An EPLI lawsuit can break a company just because of the negative publicity these lawsuits attract. In order for a big business to operate smoothly, employees need to feel comfortable at work. This can be much harder when you have thousands of employees to manage.

It does not matter how big or small your company is, you are at risk. An EPLI policy protects your business against these charges no matter the result.

EPLI in California
Laws and regulations vary state by state which alters the coverages that are included in your Employment Practices Insurance Policy. California is always on the forefront of implementing new laws and regulations to better serve their residents. These changes can be difficult for companies to understand and adapt to.

Silicon Valley has helped transform California into the business capital of the United States. Entrepreneurs are flooding to the Golden State to be a part of this movement. Small businesses make up 99.98% of businesses in California. This is why Employment Practices Liability Insurance is so important to have. It is a recipe for disaster, combining small businesses barely maintaining financial stability with California’s constantly changing laws and regulations for businesses.

California's complex regulation system makes an EPLI policy that much more vital for businesses. With an Employment Practices Liability Insurance policy you can sleep knowing your company is covered and focus on increasing profits.

How to Reduce Your Average EPLI Claims?
Although an Employment Practices Liability Insurance policy is a great way to combat these lawsuits, attacking the problem before it arises is the best way to prevent it.

In order to reduce your average number of EPLI claims, follow these steps.

Establish Workplace Policies

Ensure that employees are aware of the zero tolerance policy when it comes to harassment, discrimination, and unprofessional behaviors. Establishing this during the hiring process will instill its importance in the workplace. Providing employees with a handbook or guide that explains the policies that they can refer back to when necessary is a great way to remind employees of the company’s policies and expectations.

Educate Management and Employees

Set aside time to train all managers, supervisors, and employees on ethical workplace behavior. Focus on relative topics like workplace discrimination and harassment and the negative effects they can have on people.

Periodic Performance Reviews

Performing routine performance reviews show employees how they are doing and what they can do to improve. These meetings are also a great opportunity for employees to voice any concerns they are having at the office.

Documentation

Every company should have a filing system for employee issues and how each situation was resolved. These records can be useful to know when a problem has been brought or more than once and needs to be immediately addressed.

In-depth Job Descriptions

Provide employees with an in-depth job description that clearly states the task at hand, the skills required, and expectations. This can protect your company if a worker is not achieving the desired results and needs to be terminated.

Screening and Hiring Procedures

Implementing a vigorous screening and hiring process can help find the best candidates for your job openings.

Where to Get an EPLI Policy
Here at Coverwallet, we highly recommend protecting your company with an Employment Practices Liabilities Insurance policy. Both small and big businesses can benefit greatly from an insurance policy like EPLI.

This policy provides additional coverage to your company to help save thousands in legal and attorney fees.

If you are not currently covered or are looking to improve your company’s coverage and you need more information, consult with a CoverWallet advisor.