EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.
The number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such lawsuits. Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Business owners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a stand-alone coverage.
EPLI provides protection against many kinds of employee lawsuits, including claims of:
- Sexual harassment
- Wrongful termination
- 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
The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.
To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
- Create effective hiring and screening programs to avoid discrimination in hiring.
- Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
- Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
- Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
Many large corporations are well protected by substantial coverage and can deal with nearly any type of employment-related lawsuit. Unfortunately, new and/or small businesses can be highly vulnerable to this type of claim. Many of these businesses lack an employee handbook or a legal department that can advise on proper procedures to follow regarding terminating, disciplining and hiring employees.
Employment practices liability insurance, or EPLI insurance, protects business owners from claims arising from employment-related issues, including wrongful termination, discrimination, and sexual harassment. The cost of EPLI insurance depends on several factors, such as business size and employee turnover. However, most small businesses can get EPLI coverage for less than $1,200 per year.
The cost of EPLI insurance typically ranges in premium between $800 and $3,000 annually, with $1,200 being the average annual cost of EPLI. Deductibles can be as high as $25,000 to $50,000 for small businesses. To get a better idea of where your business falls on the annual cost range, consider the various factors affecting EPLI rates, such as the number of employees or employee turnover.
The most important factors that affect the cost of EPLI insurance include:
- Number of Employees: The more employees you have, the more risk exposure you have to EPLI claims and the higher your cost will likely be.
- Employee Turnover: High turnover rates demonstrate greater potential for employment practices claims like wrongful termination, which will increase your premium costs.