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An Overview of Employment Practices Liability Insurance (EPLI)

Discrimination is alive and well in the business world, with 90,558 cases awarding $505 million in damages in 2018 alone.

There is a lesser-known but important insurance policy that protects businesses from facing the brunt of discrimination and retaliation claims. It is known as EPLI insurance, or employment practices liability insurance.

EPLI is a worthwhile additional expense because of the time and money it saves. A business that puts practices in place to cut costs and reduce claims will reap even more benefits.

Read our overview to understand the benefits an EPLI policy can provide, how to run your business in a way that increases these advantages, and where to get this important coverage.

What Is EPLI Insurance?

An employee is within their rights to take legal action if they are discriminated against. The company must bear the burden of any legal fees and pay any damages. The best form of protection against this is an EPLI policy or employment practice liability insurance policy.

EPLI deals with many types of discriminatory treatment. This includes refusing to hire or promote someone due to their race, religion, or other protected factors. The policy protects businesses from any EPLI claims filed by employees, primarily by helping with the resulting legal fees.

Other Types of Business Insurance

EPLI is sometimes confused with other similar types of insurance. While they are all an important asset for protecting businesses, they differ in many ways.

There are other types of insurance policies that protect businesses from facing lawsuits or other repercussions because of employee mistakes. They include D&O, or directors and officers, and E&O, or errors and omissions. They differ from EPLI, however, in what kind of behavior they protect against.

EPLI applies to willfully ignoring rights such as privacy and autonomy. D&O and E&O both protect against claims relating to negligence or misleading information. Both are important for different reasons.

Insurance that covers more than one type of event provides the best value and protection. That is why, while it is helpful on its own, employment practices liability insurance is often purchased as part of a management liability practice policy. This includes other provisions like fiduciary liability insurance and employment liabilities insurance.

Knowing the right policy to buy is an essential part of running an effective business. Check out our blog post for more information on the different kinds of insurance every business owner needs.

What EPLI Insurance Covers (and What It Doesn’t)

Employment practices liability insurance does not cover every eventuality. It is important to understand when and how it can be used to determine if it is the right fit for your business.

Employment practices liability insurance primarily deals with unfair treatment and discrimination. The top five charges alleged in EPLI claims are retaliation and discrimination based on race, disability, sex, and age. Going to court over such sensitive issues can be time-consuming and expensive, which is why coverage is necessary.

Any activity that is illegal, occurs during a strike or under contract or involves punitive damages is outside an EPLI’s policy’s power of protection. If these matters go to court, it is up to the business to cover any costs.

How to Get the Best EPLI Policy

Not all insurance policies are the same. It’s important to examine all terms before agreeing to them. There are certain things a business can look for in a potential policy to make sure they get the best possible coverage. There are different types of employment practices liabilities coverage, and choosing the best one depends on the needs of the business.

One important consideration is claims-based vs. occurrence-based. The former only allows employees to file EPLI claims while the policy is in effect, while the latter doesn’t take into account when the event is reported.

Another essential component of an EPLI policy is whether it allows for selecting your own defense. A policy that establishes a duty to defend limits the policyholders’ choices, but one with a duty to reimburse does not. Choose carefully if being able to choose a defense team is important to your business.

How to Minimize EPLI Claims and Cut Costs

Adding an insurance policy means incurring additional costs. Having insurance does not prevent claims from being filed. Fortunately, there are actions a business can take to address both of these issues.

Minimizing Claims

Having insurance does not eliminate the possibility of employees engaging in or seeking a settlement for discriminatory acts. There are simple policies a business can enact to reduce claims.

Post standards throughout the workplace. Monitor the hiring process to check for discrimination. Educate employees about the company standards on discrimination and fairly discipline anyone who ignores them.

A business owner must ensure that employees know and respect the rules. If they do, they will benefit from a better environment and fewer EPLI claims.

Cutting Costs

EPLI insurance is a worthwhile extra expense for many businesses. Those who work with the public and are at greater risk of facing claims, making it an even more necessary form of protection.

Employment practices liability coverage can save a business an astronomical amount of time and money. EPLI claims typically take 318 days and $160,000 to resolve. Many businesses cannot afford not to protect against such large drains on their time and money.

Employment practices liability coverage can cost anywhere from $800 to $5,000. There are many factors that affect the final price, including the number of employees and previous claims.

Many of the same practices that reduce claims will also help cut costs. The fewer claims lodged against a business, the lower the premiums.

It is also important to monitor other elements to keep costs low. Employee turnover also affects rates, so maintaining staff is important.

Protect Your Business

Understanding EPLI insurance and why your business needs it is only the first step. The next is to find a company to get the best possible policy.

We offer effective EPLI insurance policies for businesses of all shapes and sizes. Contact us for a quote or more information today.