Employment Practices Liability Insurance Policy Information
Employment Practices Liability Insurance. Also know as EPL or EPLI, is a policy which protects business owners from the potential liability which is posed by employees in the event of a lawsuit. The insurance policy protects from potential claims of sexual harassment, on the job discrimination, or if an employee claims they were improperly dismissed or disciplined, for any reason or another.
Allegations are made by employees who claim to have suffered various types of financial loss or emotional injury because of their employers' acts (or failure to act). The list of allegations involves wrongful termination, demoting an employee without justification, failure to hire or promote a worthy employee, unwarranted discipline or abuse (particularly sexual harassment). Many of these offenses are said to be the result of illegal discrimination on the basis of age, gender, religion, race, nationality, or sexual orientation.
Other offenses are claimed to be a violation of the individual's civil rights, or the failure to accommodate a mental or physical limitation or disability. Sexual harassment by the employer's management or supervisory staff, or by fellow employees, has grown to include allegations of same-sex harassment. In addition to injuries involving sexual abuse, physical, mental or emotional abuses are also being claimed with more frequency.
Employers must take great care to have firm, written policies and procedures in place to prevent such abuses and injuries. Various laws and government agencies hold employers responsible for the training and implementation of programs to protect their employees from supervisors and fellow employees. Modern trends toward "downsizing," business failures, relocations, outsourcing, and companies phasing out or selling-off products or services increase the level of employee claims.
Often, employees deemed most expendable by the company become the most disgruntled and in the frame of mind to sue. In many other cases, employees are becoming more aware of their rights and are gaining the will to seek to have unacceptable actions and work environments addressed.
Due to the sheer fact that as a business owner, you are always under a potential threat where a disgruntled employee might attempt to sue you, or claim you were irresponsible in dealing with them (issues with termination or discipline such as suspending them), it is worth your while to consider purchasing a employment practices liability insurance policy to protect your business.
Employment practices liability insurance protects your business from claims made by employees alleging discrimination with rates as low as $37/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked EPLI questions:
- How Much Does Employment Practices Liability Insurance Insurance Cost?
- Is Employment Practices Liability Insurance Mandatory?
- How Does An Employment Practices Liability Policy Protect Your Company?
- What Does An Employment Practices Liability Policy Cover?
- What Isn't Covered By An Employment Practices Liability Policy?
- Does My Business Need Employment Practices Liability Insurance?
- What Are Current Trends Contributing To EPLI Allegations & Claims?
- What Are Common Employment Practices Liability Insurance Coverage Gaps?
How Much Does Employment Practices Liability Insurance Insurance Cost?
The average price of a standard $1,000,000 Employment Practices Liability Insurance policy for small businesses ranges from $67 to $109 per month based on location, industry, payroll, number of employees and experience.
Is Employment Practices Liability Insurance Mandatory?
As is the case with nearly any other insurance policy other than workers compensation, you are not required by law to purchase employment practices liability insurance for your business. However, doing so is the only way to ensure you are covered, and are not going to pay out of pocket, in the event you are found liable of wrongful termination, or other claims an employee or former employee claims you are found guilty of.
How Does An Employment Practices Liability Policy Protect Your Company?
With your employment practices liability insurance policy you are basically covered in the event an employee or a former employee attempts to sue your business. Issues may stem from:
- Claims of sexual or other harassment claims.
- Termination where an employee claims they were unfairly terminated.
- Lawsuits stemming from on the job injuries or different worker comp claims.
- Wrongful termination and retaliation claims are also covered under your policy.
- Suits which may stem from an injury on the job (even if you are not at fault as the employer) where an employee claims you are at fault.
What Does An Employment Practices Liability Policy Cover?
Employment practices liability insurance provides broad insurance protection from employment-related practices claims and lawsuits that are brought against your company, managers and directors and officers. It covers such things as age and gender discrimination, sexual harassment, wrongful discipline and termination and negligent decisions involving hiring, promotion, and compensation. It also applies to breach of employment contract, employment-related emotional distress, and mental anguish, invasion of privacy, libel, and slander.
The insurance company agrees to pay amounts the insured is legally obligated to pay as damages for wrongful acts covered by the insurance provided, up to the limits of insurance. A wrongful act means any one or more of the following employment-related acts:
- Wrongful demotion or failure to promote, negative evaluation, reassignment or discipline of a current employee or wrongful refusal to employ
- Wrongful actual or constructive termination of an employee in violation or breach of law, public policy or a non-employment contract or agreement
- Wrongful denial of training, deprivation of career opportunity or breach of employment contract
- Negligent hiring or supervision resulting in any of these offenses
- Retaliatory actions against an employee
- Coercion of an employee to perform illegal acts
- Libel and other types of personal injury
- Any type of abuse emanating from discrimination
What Isn't Covered By An Employment Practices Liability Policy?
EPLI exclusions must be examined carefully because many of them have conditions, exceptions, limitations or restrictions not shown below. Coverage does not apply to:
Criminal, Fraudulent Or Malicious Acts - An insured's liability as a result of criminal, fraudulent or malicious acts or omissions by that insured is excluded. The insurance company's defense duty remains until legally determining the existence criminal, fraudulent or malicious act or omission.
Contractual Liability - Any wrongful act for which the insured is obligated to pay damages because of assuming liability solely via a contract or agreement is not covered.
Workers Compensation And Similar Laws - Any obligations of the insured imposed by any workers compensation, disability benefits, unemployment compensation or similar law are excluded.
Violation Of Laws Applicable To Employers - Coverage does not apply to the named insured's violation of its responsibilities or duties required by any federal, state or local statute, rule or regulation, and any related rules and regulations developed to apply to them, other than the following:
- Title VII of the Civil Rights Act of 1964
- The Americans with Disabilities Act (ADA)
- The Age Discrimination in Employment Act
- The Equal Pay Act
- The Pregnancy Discrimination Act of 1978
- The Immigration Reform and Control Act of 1986
- The Family and Medical Leave Act of 1993
- The Genetic Information Nondiscrimination Act of 2008
- Any other similar state or local statute, rule or regulation that prescribes responsibilities or duties involving the same acts or omissions.
- Amendments to the above
- A wrongful act that is the result of the named insured's failure to comply with required accommodations for the disabled and any expenses incurred resulting from required accommodations for the disabled due to ADA or any amendments to the act continue to be excluded.
There is no exclusion for claims alleging retaliatory treatment by an insured against any person making a claim as a result of that person's rights under any statute, rule, or regulation.
Strikes And Lockouts - Any wrongful act committed against any striking or locked-out employee, or to an employee temporarily or permanently replaced due to a labor dispute, is excluded.
Prior Or Pending Litigation - No claim or suit that is brought against any insured is covered if it existed or was pending before the applicable Pending or Prior Litigation Date shown on the declarations. This exclusion applies to claims or suits that arise out of the same or substantially the same facts, circumstances, or allegations that are the subject of or the basis for such claims or suits.
Prior Notice - If a claim had been reported or a notice had been given under a prior insurance policy, there is no coverage under this insurance policy for any wrongful act within that reported claim or notice. There is a requirement that the prior insurance policy must provide coverage similar to that which is part of this insurance policy.
Does My Business Need Employment Practices Liability Insurance?
The employment practices liability exposure begins when an entrepreneur hires his or her first employee. A new employer must first identify the job responsibilities of the employees she seeks. She must clearly define the job requirements and expectations, the training needed and the training the employer will provide, as well as the output expected of each type of employee. If employer expectations differ from employee perception of the job duties and compensation, EPLI claims may follow.
The employer must develop excellent recruitment and hiring practices. Its procedures should be carefully evaluated and published in a manual that every supervisor is expected to read and understand. The procedures must be monitored to make sure all are followed in every circumstance. Discrimination among employees can only be practiced when there are clear and unarguable reasons such as setting a minimum employee age to comply with child labor laws or prohibiting certain employees from certain jobs due to known health hazards associated by gender or age.
There are always possible lawsuits lingering around you as a business owner. For this very reason you have to know how to shield yourself from liability with the EPLI policy. This namely is the case when dealing with former employees or an employee who thinks they were unfairly treated for any reason.
Of course each employment practices liability insurance policy is going to differ based on the insurer you choose, as well as the level of coverage you choose to purchase. So as a business owner, you do have to understand EPLI policy terms, and level of coverage, in order to ensure you find the best price as well as the best coverage to fully protect your business and assets from the potential lawsuits from disgruntled current or former employees.
What Are Current Trends Contributing To EPLI Allegations & Claims?
- Businesses often have management and supervisory personnel who are older and have different work ethics and disciplinary methods than the newer, younger employees. Supervisors may not have the training or communication skills to manage their younger staff members.
- Career-long employment is now rare, affecting the level of employee loyalty and causing higher turnover.
- Certain laws encourage employers to hire untrained employees with little or no experience and few work skills in order to gain tax-incentives.
- Contractors seeking federal business face higher scrutiny due to the demand to comply with all local, state, and federal employment laws.
- Employers often must provide very basic interpersonal skills in the workplace training, adding a burden of having to provide such training consistently to every employee.
- Increasingly, employers must compete nationally or even internationally, dramatically changing the scope of many businesses.
- Many businesses utilize internship programs and college recruiting practices to hire younger professionals as managers, human resource representatives and for talent acquisition. These younger managers and supervisors may lack the ability to effectively communicate with their older and more tenured staff.
- Privatization results in jobs previously managed by governments being converted to the private sector. Possible changes in employee support systems may mean that employees may seek new remedies for perceived injustices.
- Prolonged economic downturns create downsizings, deferred salary increases, higher business expenses, and other issues that strain employer/employee relationships.
- The American workforce is increasingly diverse, bringing together more people with vastly different backgrounds, race, religion, economic levels, social standings, and cultures.
- The emphasis on technology and cost-cutting practices place greater demands on remaining workers.
- The quantity of federal, state, and local legislation and regulatory edicts provide employees with additional ways to allege mistreatment by their employers.
What Are Common Employment Practices Liability Insurance Coverage Gaps?
Not Adding Third-Party Liability Coverage To Employment Practices Liability Policies
Employment Practices Liability Insurance policies were initially designed to cover claims by employees against their employers in conjunction with the employment process.
Third-party liability coverage endorsements to Employment Practices Liability policies broaden the scope of these policies to cover claims by a firm’s customers or other nonemployees (third parties) based on the actions of the firm’s employees.
Without third-party coverage, a business might end up with uncovered claims that could have been covered.
No Defense Coverage For Wage & Hour Claims In An EPLI Policy
Employment Practices Liability insurers routinely exclude coverage for wage and hour claims. Exclusions typically apply both to judgments/settlements and to defense costs.
Some insurers will provide defense coverage for such claims, by endorsement only, subject to a separate sublimit. This will close a huge gap in coverage.
The majority of wage and hour claims center around whether an employer wrongly failed to pay overtime because the employer mistakenly classified an employee as "exempt" and thus considered the employee ineligible to receive overtime pay under the FLSA.
However, wage and hour claims may also arise from causes other than failure to pay overtime due to the misclassification of a worker. Here are some examples:
- Misclassifying employees as independent contractors and not paying them overtime as independent contractors are ineligible for overtime pay.
- Not properly paying employees for overtime. For example - not paying compensation for hours worked in excess of 8 hours in a given day or more than 40 hours in a week.
- Miscalculating the amount of wages owed.
- Allowing employees to work "off the clock".
- Not allowing employees to take meal or rest breaks.
- Not paying employees on a timely basis.
- Not paying all wages due and owing at the time of termination.
- Docking exempt employees' salaries for absences.
Litigating wage and hour claims can be extremely expensive. Often, the prevailing plaintiffs (both current and former employees) can recover double the actual damages, plus attorneys' fees. Multiplied damages, in part, account for many astronomical wage and hour awards and settlements.
Employment Practices Liability Insurance - The Bottom Line
When you decide to invest in an EPLI policy, make sure you go through a reputable insurance provider. Sure you may pay less with an unknown insurer that a broker sells you up front, but when the time comes to pay off a claim or pay for legal fees, they might delay and make you wait to receive the claim payments. This will not be the case when you go through a reputable insurer and broker for the coverage you purchase to protect your business.
It is important to know how much your deductible is, as well as what additional expenses you are going to incur with the different insurance companies offering this coverage, in order to ensure you make the right decision when the time comes to choose your policy.
You have invested so much time and money to build your business; you do not want to run the risk of losing it all because a former disgruntled employee wants to sue you. With employment practices liability insurance in place, you are covered from claims which are made by former or current employees.
'Real Life' Court Cases Involving Employment Practices Liability:
Town vs. Michigan Bell Telephone Company
Veronica Town worked for Bell Telephone Company. An opportunity for transfer was initiated by Town and after interview with Bell, offered to her. When Town learned that the work schedule involved four 12-hour shifts, she had to decline as Town provided care for her husband with a serious health condition that would not fit into that type of work schedule. She accepted a position as a manger in another area.
About a year later, due to internal organizational changes, Town learned she was being transferred to the position she had originally turned down because her position as manager was being consolidated into another job. The consolidated managerial position was given to a 35-year old male. Town felt forced to resigned and took an early retirement at age 49. She filed suit against Bell citing both age and sex discrimination.
The jurisdiction of the suit bounced between state and federal court, finally ending within state jurisdiction. A trial was held with a verdict in favor of Town. Bell appealed, requesting a directed verdict. Bell contended that there was a valid reduction in work force necessitating the consolidation and transfer. Town was not selected for the consolidated position because her performance (in the opinion of Bell) was not as good as the person given the position. Both employees were qualified for the combined position.
Town was not able to produce evidence that age or sex entered into the decision. The Michigan Supreme Court made a decision in favor of Bell.
(Town vs. Michigan Bell Telephone Company, No. 97-102845, Veronica Town, Plaintiff-Appellant, vs. Michigan Bell Telephone Company, Defendant-Appellee, Michigan Supreme Court, Lansing, Michigan.)
Lytle v. Malady
Nancy Lytle had worked for Howmet Corporation for 18 years in the human resources area when she was terminated. At the time of her hire, the employee manual carried a statement that no employee will be terminated without proper cause. It further contained a statement that the employee manual was not an employment contract. Later the manual was revised to make clear that employment was at the will of the employer who reserved the right to terminate, however, Lytle was led to believe that the new disclaimer was for new hires only. It was only distributed to new employees as they hired on.
Nancy Lytle had worked for Howmet Corporation for 18 years in the human resources area when she was terminated. At the time of her hire, the employee manual carried a statement that no employee Lytle received favorable reviews and internal promotions. Her performance was exemplary. She had been assured during a period of internal company adjustment that her position was secure and she was well regarded.
When her original director retired, a new director, Michael Malady, took has place. An apparent personality conflict occurred. In one incident, Malady required female employees to wear dresses to a company picnic. When Lytle wore slacks, she received an unfavorable job performance evaluation.
Nancy Lytle had worked for Howmet Corporation for 18 years in the human resources area when she was terminated. At the time of her hire, the employee manual carried a statement that no employee As a result of a swing toward centralization, jobs were realigned within the company and the organizational structure was changed. Lytle, than 44 years of age, was terminated. The reason stated was reduction in work force due to a reduction of military contracts and downward trend in the airline industry.
Upon Lytle's termination processing, her valuation indicated that she had been an employee in good standing and that she would be rehired should an appropriate position open. However, under the new organization, a similar position was created for the new internal structure and an employee from outside the company was hired. The new employee had very similar qualifications to Lytle. Lytle was not contacted or allowed rehire or access to the position. The new employee was 31 and offered a salary higher than Lytle's.
Nancy Lytle had worked for Howmet Corporation for 18 years in the human resources area when she was terminated. At the time of her hire, the employee manual carried a statement that no employee Lytle filed suit challenging the reduction in work force reasoning and alleging age and sex discrimination. The trial court ruled against Lytle but the appeal court ruled in her favor.
Nancy Lytle had worked for Howmet Corporation for 18 years in the human resources area when she was terminated. At the time of her hire, the employee manual carried a statement that no employee In a mixed decision of the Michigan Supreme Court with dissent, it was determined that the reduction in work force overall appeared valid. However, based upon the fact that Lytle was over 40, even though she had had very favorable reviews overall, she was replaced by a substantially younger person at a higher salary. Thus, the decision of the Court of Appeals was affirmed in favor of Lytle.
(Lytle v. Malady, No. 97-102515, Nancy Lytle, Plaintiff-Appellee vs. Michael Malady and Howmet Corporation, Defendants-Appellants, Michigan Supreme Court, Lansing Michigan.)
Types Of Small Business Insurance - Requirements & Regulations
Perhaps you have the next great idea for a product or service that you know will appeal to your local area. If you've got a business, you've got risks. Unexpected events and lawsuits can wipe out a business quickly, wasting all the time and money you've invested.
Operating a business is challenging enough without having to worry about suffering a significant financial loss due to unforeseen and unplanned circumstances. Small business insurance can protect your company from some of the more common losses experienced by business owners, such as property damage, business interruption, theft, liability, and employee injury.
Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a loss or recovering with minimal business interruption and financial impairment to your company's operations.
Insurance is so important to proper business function that both federal governments and state governments require companies to carry certain types. Thus, being properly insured also helps you protect your company by protecting it from government fines and penalties.
Small Business Insurance Information
In the business world, there are many risks faced by company's every day. The best way that business owners can protect themselves from these perils is by carrying the right insurance coverage.
The The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.
Commercial insurance is particularly important for small business owners, as they stand to lose a lot more. Should a situation arise - a lawsuit, property damage, theft, etc. - small business owners could end up facing serious financial turmoil.
According to the SBA, having the right insurance plan in place can help you avoid major pitfalls. Your business insurance should offer coverage for all of your assets. It should also include liability and casual coverage.
Types Of Small Business Insurance
Choosing the right type of coverage is absolutely vital. You've got plenty of options. Some you'll need. Some you won't. You should know what's available. Once you look over your options you'll need to conduct a thorough risk assessment. As you evaluate each type of insurance, ask yourself:
- What type of business am I running?
- What are common risks associated with this industry?
- Does this type of insurance cover a situation that could feasibly arise during the normal course of doing business?
- Does my state require me to carry this type of insurance?
- Does my lender or do any of my investors require me to carry this type of policy?
A licensed insurance agent or broker in your state can help you determine what kinds of coverages are prudent for your business types. If you find one licensed to sell multiple policies from multiple companies (independent agents) that person can often help you get the best insurance rates, too. Following is some information on some of the most common small business insurance policies:
|Business Insurance Policy Type||What Is Covered?|
|General Liability Insurance||What is covered under commercial general liability insurance? It steps in to pay claims when you lose a lawsuit with an injured customer, employee, or vendor. The injury could be physical, or it could be a financial loss based on advertising practices.|
|Workers Compensation Insurance||What is covered under workers compensation insurance? This type of insurance protects a business and its owner(s) from claims by employees who suffer a work-related injury, illness or disease. Workers comp typically provides the injured employee with benefits to cover medical expenses, a portion of his/her lost wages, rehabilitation costs if applicable, and permanent partial or permanent total disability.|
|Product Liability Insurance||What is covered under product liability insurance? I pays an injured party's settlement or lawsuit claim arising from a defective product. These are usually caused by design defects, manufacturing defects, or a failure to provide adequate warning or instructions as to how to safely use the product.|
|Commercial Property Insurance||What is covered under business property insurance? General liability policies don't cover damages to your business property. That's what commercial property insurance is for. It protects all of the physical parts of your business: your building, your inventory, and your equipment, giving you the funds you need to replace them in the event of a disaster. If you work from home, you might consider a Home Based Business Insurance policy instead.|
|Business Owners Policy (BOP)||What is covered under a business owners policy (BOP)? This is a policy designed for small, low-risk businesses. It simplifies the basic insurance purchase process by combining general liability policies with business income and commercial property insurance.|
|Commercial Auto Insurance||What is covered under business auto insurance? This type of insurance covers automobiles being used for business purposes. This could include a fleet of business-only vehicles or a single company car. In some cases it might cover your car or your employee's car while they're being used for business. These policies have much higher limits, ensuring you can cover your costs if one of these vehicles gets into an accident.|
|Commercial Umbrella Policies||What is covered under commercial umbrella insurance? This type of policy is a sort of "gap" insurance. It covers your liability in the event that a court verdict or settlement exceeds your general liability policy limits.|
|Liquor Liability Insurance||What is covered under liquor liability insurance? It covers bodily injury or property damage caused by an intoxicated person who was served liquor by the policy holder.|
|Professional Liability (Errors & Omissions)||What is covered under professional liability insurance? This type of business insurance is also known as malpractice oe E&O. It covers the damages that can arise from major mistakes, especially in high-stakes professions where mistakes can be devastating.|
|Surety Bond||What is covered under surety bonds? Bonding is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation).|
Who Needs General Liability Insurance? - Virtually every business. A single lawsuit or settlement could bankrupt your business five times over. You might also need this policy to win business. Many companies and government agencies won't do business with your company until you can produce proof that you've obtained one of these policies.
Business Insurance Required by Law
If you have any employees most states will require you to carry worker's compensation and unemployment insurance. Some states require you to insure yourself even if you are the only employee working in the business.
Your insurance agent can help you check applicable state laws so you can bring your business into compliance.
Other Types Of Small Business Insurance
There are dozens of other, more specialized forms of small business insurance capable of covering specific problems and risks. These forms of insurance include:
- Business Interruption Insurance
- Commercial Flood Insurance
- Contractor's Insurance
- Cyber Liability
- Data Breach
- Directors and Officers
- Employment Practices Liability
- Environmental or Pollution Liability
- Management Liability
- Sexual Misconduct Liability
Whether you need any or all of these policies will depend on the results of your risk assessment. For example, you probably don't need an environmental or pollution policy if you're running an IT company out of a leased office, but you would need data breach and cyber liability policies to fully protect your business.
Also learn about small business insurance requirements for general liability, business property, commercial auto & workers compensation including small business commercial insurance costs. Call us (855) 767-7828.
Additional Resources For Small Business Insurance
Protect your company and employees with the right commercial insurance policies. Read informative articles on small business insurance coverages - and how they can help shield your company from legal liabilities.
- Small Business
- Business General Liability
- Business Interruption
- Business Liability
- Business Owners Policy (BOP)
- Certificate of Insurance
- Commercial Auto
- Commercial Umbrella
- Comprehensive General Liability
- Directors and Officers Liability
- Cyber Liability
- Employers Liability
- Employment Practices Liability
- Event Cancellation
- General Liability
- Home Based Business
- Independent Contractor
- Liability Insurance Certificate
- Liability Insurance
- Professional Liability
- Workers Compensation Insurance
Your small business faces many potential disasters including: fire, floods, theft, equipment breakdown, lawsuits from clients or customers and current & former employees. Any many other risks you haven't even thought about.
A small business commercial insurance program should provide protection for both larger and smaller disasters. The obvious things like fire, flood and theft most business owners think about... but what if a hacker infects your computers with a virus - and files containing private customer information like credit card and Social Security numbers are stolen?
Who is going to pay to fix your customers credit rating etc...? Will your insurance pay for the cost? You need to know that.
Your commercial insurance program should cover events that can close down your company, or cause it to lose revenue. Anything less than that is not enough coverage. Commmercial insurance doesn't cover everything, and all policies have exclusions and limits.
You need a written plan that allows you to get your operations back up and running as quick as possible.