What is employment practices liability insurance?

Employment practices liability insurance (EPLI) protects your small business when a worker sues over employment-related issues. This policy covers your legal costs when an employee or group of employees claim their civil rights were violated or they were unable to complete their work in a fair environment.

Learn more about EPLI coverage.

In a claims-made policy, a claim is covered only if your policy is active both when the incident occurred and when the claim is filed. For example, your house painting business is forced to close, so you cancel your EPLI coverage. A few months later, a former employee sues you for discrimination, but since you no longer have an EPLI policy, the insurer likely won’t pay for lawsuit costs. Note that in some situations, you may be able to extend a policy beyond its original end date.

Most EPLI policies include a deductible, which is an amount that you pay out of pocket toward legal costs before an insurer contributes. Some policies limit coverage during acquisitions or major staff reductions. Employment dispute lawsuits can be expensive, so keep that in mind when choosing what an EPLI policy covers.

Some EPLI policies stipulate that the insurance company will choose your attorney if a claim is filed, usually because the insurer wants a lawyer who has expertise with relevant cases.

Small businesses can often bundle employment practices liability insurance with directors and officers insurance. D&O protects a business’s board members and officers against lawsuits over decisions they made on behalf of the company that resulted in financial loss.