What is Employment Practice Liability Insurance (EPLI)

The world today is fraught with many perils that can derail your business in its tracks, effectively crushing your dreams and endangering your way of life. One such scenario is facing a lawsuit designed to do your business harm.

As a business owner of any sized business, you can face this scenario, even if you are not at fault. In fact, even the costs associated with protecting your business’s interest in a case that doesn’t end up in a lawsuit can be costly enough to doom your business if you aren’t protected. Thankfully, there is protection from the scenario available to you right now in the form of Employment Practice Liability Insurance (EPLI). 

How Frequently are EPLI Cases Filed And Are They Costly?

According to the Equal Employment Opportunity Commission (EEOC) throughout the past 10 years, employee filings with their organization have increased over 20%. Astoundingly, the average cost of an employee-related settlement is upwards of $70,000. Therefore, you can imagine the havoc it causes when a business is targeted without EPLI protection. 

What is EPLI?

The EPLI coverage is protection against being sued by former or current employees, who have alleged that their legal rights were violated in some manner. In general, the coverage extends to include protection against legal lawsuits involving all the situations listed below and more:

  • Discrimination.
  • Wrongful termination.
  • Sexual harassment.
  • Failure to employ or promote.

Third-Party Employment Practices Liability Coverage

This is a separate agreement contained within Employment Practices Liability Insurance (EPLI) policies that covers liability claims brought by non-employees, such as customers, clients, etc., against employees of the insured organization. The coverage provided by these agreements is more than often vital because coverage for claims by non-employees is not provided under general liability policies.

What is the Cost of Purchasing EPLI Coverage?

There is no way to ascertain an exact amount that EPLI coverage will always cost as the purchase price varies based on the size of your business and your current turnover rate. The policies will cover your business against the cost of defending a lawsuit, judgment and settlements. In fact, EPLI covers your legal costs whether your company wins or loses the lawsuit.

How to Prevent Employee Lawsuits 

While EPLI coverage is the first step you can take to protect your business in the event of an employee-initiated lawsuit— and is wholeheartedly advised—ideally you can prevent the problem from ever occurring by adhering to the following guidelines:

  • Provide on-the-job Safety Training: Part of your training process should always include information on job safety and applicable training. Employees need to know how to stay safe when performing their jobs. 

  • Define Job Success: It is discouraging for employees who want to move up or be promoted to not ever seem to be able to achieve that goal because just as they are about to grasp it, the requirements change. This means that you are in essence moving the goalposts on them. Instead, create an easy-to-understand guideline that will define what it means to succeed in each level of your company and also categorize what an employee needs to do to move up the ladder. Then, follow your own guidelines and don’t change the dynamics mid-climb for your employees. If you do have to make changes, make sure you communicate them to your employees.

  • Document Everything: While it might seem like a hassle initially, you will be so glad you have documents pertaining to any employee-related situation should a problem arise. Make sure you document every time an employee is reprimanded about behavior or performance or any communication at all takes place between supervisors and employees pertaining to their jobs. 

  • Prepare With Insurance: Now that you know all the other steps, make sure you are also protected with insurance because employees can claim they were mistreated even when you did nothing wrong as a business owner.

Bottom Line: Get EPLI Protection For Your Business

There are many laws in place to protect the rights of employees and to protect those individuals you are considering hiring. However, there are few in place that protect you as a business from being falsely accused of wrongdoing. Therefore, If your business has employees and/or you deal directly with customers, it is essential that you have EPLI coverage in today's litigious society


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