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EPLI Insurance (Employment Practices Liability Insurance)

from Pepper, Johnstone & Company

Employment Practices Liability insurance (EPLI insurance) protects businesses and employers against employment-related claims such as discrimination, harassment, failure to hire or promote, wrongful termination, and retaliation.

For business owners looking to reduce the financial risk of employee or applicant lawsuits, this page explains what EPLI insurance covers, why it matters as employment claims continue to rise, what is typically excluded, what affects cost, and how to get the right coverage for your company.

Discrimination
Harassment
Failure to hire or promote
Wrongful termination
Retaliation, etc.

Why You Need Protection

If you think your chances of being sued by any of your employees are one in a million...think again. Employment-related lawsuits have reached unprecedented levels. According to statistics published by the Equal Employment Opportunity Commission (EEOC) in March 2009, discrimination claims increased 13% from 2007 to 2008, with a record 95,402 claims filed in 2008, up 15% from 2007. Age discrimination claims account for almost 26% of these claims—up 22% from 2007—and more than 34% include retaliation complaints, up 18% (almost double from 2007).

According to the 2008 Jury Verdict Research report on employment practice cases, employees win these cases 61% of the time. In addition:

The average overall jury award is $252,000.
The average overall settlement is $75,000.
Average legal defense costs are $120,000 per claim.

Employment law is unique because it requires employers to pay (if they lose) the costs of the employee’s (plaintiff's) attorney fees in addition to the judgments awarded. Even an organization with sound human resources policies and procedures in place can be sued, and defending a claim can be enormously expensive. It is not uncommon for legal fees associated with winning an employment lawsuit to exceed $250,000. When you’ve spent that much on legal fees, it’s hard to feel like you’ve won anything. You’ve worked too hard and sacrificed so much to build a successful business. Don’t let others' actions put your business at financial risk.

Employment Practices Liability Claims Examples

Sexual harassment and discrimination — $775,000

A former employee claimed she was subject to sexual harassment, discrimination, and retaliation, with the harassment allegations involving both inappropriate touching and a hostile work environment. After complaining to human resources that her manager had verbally harassed her on several occasions and had touched her inappropriately on two or three occasions, the plaintiff claimed she was retaliated against and terminated. She sued for sexual harassment, retaliation, wrongful termination in violation of public policy, intentional infliction of emotional distress, negligent infliction of emotional distress, and assault. The insurance carrier paid more than $225,000 to defend the claim and paid $550,000 in settlement costs, showing how epli insurance protects against harassment and retaliation claims by helping cover defense and settlement amounts.

Breach of an implied contract — $265,000

A former employee sued a technology company, alleging that he was hired to be the VP of Sales and Marketing. He claimed that items promised to him were taken away (i.e., secretary, car allowance, staff levels, etc.) and that when he allegedly failed to meet sales targets, he was wrongfully terminated. The plaintiff brought various breach of contract claims, including a claim for a breach of an implied agreement, which sought to recover benefits, punitive damages, interest, and fees. After numerous failed mediations, the matter settled for $200,000, with $65,000 in legal defense fees.

Age discrimination — $317,500

The employee alleged that the employer discriminated against him based on his age and disability. He further alleged that he was terminated in retaliation for filing a workers' compensation claim and for complaining about discrimination. The defendant (employer) contended that the plaintiff (employee) was not able to perform the essential functions of the job and that he was discharged for legitimate, nondiscriminatory, and non-retaliatory reasons. The insurance carrier paid $175,000 in defense fees and $142,500 in settlement costs.

Discrimination — $675,000

Three former employees of a regional express package delivery service sued the company, alleging discrimination and wrongful termination. Although there were differences in each of the plaintiffs’ allegations, the claims all arose out of discrimination based on sexual orientation, marital status, and religion. In addition to claiming wrongful termination based on discrimination, two of the three plaintiffs alleged that their terminations were related to complaints about failure to pay overtime. The third employee claimed she was terminated after complaining that two employees were being treated differently regarding their sick leave. The insurance carrier paid $100,000 in legal defense fees and ultimately settled the case for $575,000.

Get the protection you need tomorrow, today.

To learn more about our Employment Practices Liability insurance products, speak with one of our experienced professionals today.

Frequently Asked Questions
about EPLI Insurance

EPL insurance can help cover legal costs and financial losses arising from employment-related claims, including allegations of discrimination and wrongful termination. An EPLI policy may also provide coverage for legal expenses and potential settlements tied to employee claims, and depending on the policy, coverage may also extend to claims made by job applicants or certain third parties, such as vendors. It can also cover claims related to harassment, retaliation, and other employment-related issues. Some policies also address threats to company reputation when public lawsuits over employment disputes arise.

Standard general liability insurance typically does not cover employment-related claims, and this insurance coverage does not extend to bodily injury or property damage under EPLI insurance because those risks belong to other policies. Workers' compensation insurance addresses employee injuries, while EPLI coverage addresses employment practices liability, showing how each coverage protects different aspects of business risk. EPLI is designed specifically to address these risks and may be added to a business owner's policy or purchased as a standalone policy for most businesses.

EPLI premiums can vary based on several factors such as business size, industry risk, previous employment-related lawsuits, and selected coverage limits, so EPLI cost is different from one business to another. Smaller businesses typically pay lower premiums. Reviewing your company's specific risks, policy limits, and exclusions can also help you evaluate whether a policy includes risk management practices such as HR training or policy audits to help prevent lawsuits. When comparing options, especially for small businesses, consult an insurance agent or insurance provider to choose coverage that fits your business needs.

EPLI covers claims related to discrimination, wrongful termination, and workplace harassment claims, but not every type of loss. Claims arising from bodily injury, property damage, and professional mistakes are generally excluded. EPLI policies generally exclude intentional or dishonest wrongful acts, and policy-specific allegations such as emotional distress, mismanagement, or wrongful infliction of career opportunity may also fall outside coverage. Coverage and exclusions can vary between insurers, so businesses should review the policy terms carefully to understand what EPLI covers. If an employee alleges a violation tied to the Medical Leave Act, other employees, or similar employment practices, the business should review its epli claims process and policy wording with the insurance company.