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You’ve probably heard mention of Employment Practices Liability Insurance (EPLI), but you may be wondering exactly what it covers and why it might be important to your business. EPLI is broadly defined as insurance that covers businesses against claims by workers that their legal rights as employees of the company have been violated. As the number of lawsuits filed by employees against companies big and small increases, it’s important to know how this coverage can provide critical protection for your company. Let’s explore what EPLI covers and why your company needs it.

What does EPLI cover?

There is a broad range of important policies that are designed to protect workers, but businesses also need to put in place protections from the financial consequences of employee-related lawsuits. EPLI can cover lawsuits involving a company’s directors and officers, negligence lawsuits regarding the human resources department, as well as liability lawsuits over fiduciary duty. EPLI can also provide protection against many other claims, including:

·         Sexual harassment

·         Wrongful termination

·         Discrimination (racial, age, gender)

·         Noncompliance with the Americans with Disabilities Act

·         Breach of employment contract

·         Negligent evaluation

·         Failure to employ or promote

·         Wrongful discipline

·         Deprivation of career opportunity

·         Wrongful infliction of emotional distress

·         Mismanagement of employee benefit plans

Additionally, EPLI can help protect your business against legal conflicts between employees and third parties, including vendors or customers, if third-party coverage endorsement is secured as part of your policy. Some insurers provide EPLI coverage as an endorsement of their Businessowners Policy (BOP), while others offer the insurance as stand-alone coverage.

Why your company needs EPLI coverage

Many businesses, especially small to mid-sized companies, think that they might be immune to lawsuits from employees, including former and potential, if they conduct their affairs in a responsible way. However, employment disputes can easily arise due to miscommunication or misunderstanding despite the best of intentions. Small to mid-sized business are actually considered the most susceptible to lawsuits, as they often haven’t established formal policies for employment practices unlike larger companies, and often don’t have a significant HR department that would be able to handle disputes.

Employment disputes and lawsuits can arise even before you actually hire someone. Even from the initial interview an applicant could claim that they weren’t hired due to discrimination. A lawsuit can also arise from a previous employee who feels that they were inappropriately terminated. Regardless of how well you run your business or how professionally you feel that you and your staff conduct your selves, you’re never completely safe from a potential lawsuit. However, having EPLI will help tremendously towards safeguarding your business’s assets and minimize or prevent legal complications.

Securing EPLI Coverage

The cost of EPLI coverage can vary depending on your type of business, the number of employees you have, as well as various risk factors, including whether your company has ben sued over employment practices in the past. Depending on the policy, the insurance will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements, whether you win or lose. Policies don’t typically pay for punitive damages or civil or criminal fines. The cost of EPLI coverage is well worth the benefits and protections that it affords your business in the long run.

It’s now more important than ever to have employment practices liability insurance. Contact your insurance provider about adding EPLI coverage and find out how creating effective hiring and employee policies can help protect you against potential lawsuits.