Insureon Blog

What Is Employment Practices Liability Insurance (EPLI)?

5. June 2014 08:42

Businessman sitting in front of colleagues

Quick: you’ve just received a formal complaint from a past employee that accuses you of religious discrimination. He alleges you didn’t let him take time to pray during the workday. The formal complaint cites the Civil Rights Act, which states religious discrimination includes neglecting to reasonably accommodate an employee’s religious practices.

What do you do? You are certain this is a misunderstanding – you can’t recall ever talking to this employee about prayer breaks. But still, with the notice in your hand, you know you have to hire a lawyer, which will strain your small business’s already slim cash reserves.

But is there another way? A financial lifeline that can help you through this stressful (and costly) legal endeavor?

If you have Employment Practices Liability Insurance (EPLI), you’ll have funds to cover your attorney’s fees and settlement or judgment costs, which can surge to millions of dollars. Read on to learn more about this coverage and how it can help you avoid financial ruin.

How Does EPLI Work?

EPLI kicks in when a current, former, or prospective employee sues your business for non-physical damages (e.g., discrimination or harassment). Your policy protects you, your managers, officers, employees, and directors. Though EPLI is a type of Errors & Omissions Insurance, it is usually excluded from standard professional liability plans. However, you can always add EPLI to your E&O policy.

Though EPLI won’t prevent your employees from bringing lawsuits against your business, it will ensure that you have the means to survive the financial hit. Even if the case is ultimately dismissed, having EPLI on hand can save you thousands in attorney’s fees alone.

Employment Practices Liability coverage can help you pay for lawsuits over…

As you can see, EPLI is a versatile coverage – and a necessary one, given the litigious nature of today’s work environments. And because this policy is “claims-made” coverage – i.e., you can only receive your benefits if the alleged incident and the claim are filed while your same EPLI policy is in force – you should consider carrying the coverage before you hire your first employee.

Remember, even job candidates could sue you if you ask the wrong question during an interview. We’ll address the hiring process later in this blog series.

It’s also worth noting that EPLI suits are among the most expensive claims a business can face. So investing in coverage now can pay off big time when your business has to use it. To get an Employment Practices Liability Insurance quote for your business today, fill out an online insurance application.

EPLI and Maintaining a Discrimination-Free Workplace

When you understand what EPLI does, you have the tools to recognize workplace discrimination. In turn, this awareness of liability risks allows you to take steps toward mitigating them.

For example, you now know that potential hires, current employees, and former employees can sue you. You also know that when you hire, terminate, and promote people, you have to be careful – these decisions can lead to costly court battles.

You’ll also want to refresh your memory on protected classes – that is, people who have employment protection under federal law. These groups include men and women who may experience employment discrimination based on their…

(You can read more about Equal Opportunity Employment laws in our post “Hiring an Employee? Know What Can Go Wrong.”)

Some key ways to reduce the likelihood of employment discrimination lawsuits is to be aware of your employees’ rights. For instance, every employee is entitled to a safe workplace (e.g., a harassment-free environment). Also, as an employer, you are responsible for making reasonable accommodations for folks with disabilities. You must also reasonably accommodate an employee’s religious practices so long as it doesn’t impose undue strain.

This post is part of an ongoing series on Employment Practices Liability Insurance, the high cost of employment discrimination lawsuits, and EEOC laws. Stay tuned for more on what can go wrong when hiring (and firing) employees.

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EPLI | Errors & Omissions | Small Business | Small Business Risk Management | Tips for All Small Businesses

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