Whether large or small, every business faces the reality that it could be faced with a job-related lawsuit or claim from a past, present, or prospective employee. Employment Practices Liability Insurance (EPLI) is a valuable tool to protect the small business owner from such claims or lawsuits brought against him, his business, or its officers, directors, or employees.
Most EPLI polices are written on a claims made basis. That is, in order for a claim to be covered, you must notify the insurance company while the policy is in effect. In addition, the event which caused the claim must have occurred either on or after the EPLI policy commencement date. In some circumstances, retroactive dates may be covered.
An EPLI policy may be written as a standalone policy or bundled with a business owner’s policy.
EPLI policies generally provide coverage for the following areas:
- Sexual harassment
- Invasion of privacy
- Mental anguish
- Emotional distress
- Discrimination, such as age, race, disability, or gender
- Wrongful employee discipline or termination
- Negligent hiring, promotion or compensation decisions
- Employment contract breach
- Mismanagement of employee benefits
- Defamation Claims
For instance, if a manager has allegedly harassed an employee, your EPLI insurance policy will provide legal assistance defense for your manager in the litigation claim. Your EPLI insurance policy will also provide coverage should a past employee claim that you fired them as a retaliation action.
Claims resulting from certain events, such as an acquisition, merger, and workforce reduction may be excluded or limited in coverage. In addition, most EPLI policies contain exclusions involving criminal conduct and violations of law such as those in violations of the following:
- Fair Labor Standards Act
- Occupational Safety and Health Act (OSHA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- State Employment Law
- Employee Retirement Income Security Act (ERISA)
- Americans With Disability Act claims
In addition to Employment Practices Liability Coverage, business should take preventative risk management steps, such as diversity and discrimination training, to minimize its exposure to claims arising from its employee’s employment practices.