Employment Practices Liability Insurance
EPLI provides coverage for claims made by employees alleging discrimination (based on sex, race, age or disability, for example), wrongful termination, harassment, and other employment-related issues.
Who Needs Employment Practices Liability Insurance?
In our litigious environment, there are many instances in which employment practices liability insurance is required.
Employment-related risks start the moment an applicant walks in the door or visits the “Careers” section on your website. There are many illegal interview questions, and the applicable law may vary among different office locations. For example, some local and state governments have passed “ban the box” legislation that prohibits questions about criminal history on initial applications, yet in some other areas, these questions are perfectly fine to ask.
During employment, rogue managers are often an issue. If someone makes an inappropriate comment within earshot of an offended worker, the company is usually liable. Most EPLI policies cover these incidents.
Not only that, but former employees do not waive discrimination complaints by accepting a severance package or signing a waiver.
So, if you’re still asking whether you need EPLI or not, the answer is that you probably do.
Does your business perform any of the following actions?
If so, then you’ll need EPL coverage.
Why Do Businesses Need EPLI?
There are many reasons why the number of harassment claims seems to be constantly increasing; it’s certainly not a coincidence and correlates with broader societal changes.
Social media has certainly a lot to do with, considering that it is now a lot easier to connect and engage with your coworkers. This also means that it’s a lot easier to harass coworkers, especially with the proposition of cyber bullying being thrown into the equation.
Social media has also provided a voice to the harassed and has made it easier for those who have been harassed at work to speak out about it. The #MeToo movement is a good example of this.
In addition, LGBT and transgender communities are continuing to grow and assimilate into the mainstream, causing people from these groups to commonly encounter discrimination and harassment in the workplace.
According to a preliminary 2018 report on sexual harassment claims by the EEOC, sexual harassment charges increased by more than 12 percent and sexual harassment lawsuits filed by the EEOC’s attorneys increased by 50 percent from the previous year.
Employee lawsuits are on the rise, and even if you’re in the right, the legal costs can still be staggering. That’s why you need to protect your business with EPL insurance no matter what.
What Does EPL Insurance Cover?
Generally speaking, EPLI policies will cover the costs of defending your company against lawsuits, settlements and judgments. As long as the act that was committed is not illegal, the legal costs will be covered regardless of whether the case is won or lost.
These are the types of claims that an EPLI policy (a good one) should be able to cover:
What Doesn’t EPL Insurance Cover?
As we previously mentioned, if the act that your company is being sued for is an illegal one, then the EPLI policy will not cover your costs.
However, there are losses and claims an EPLI policy will not cover, some of which include:
- Civil fines
- Criminal fines
- Unpaid wages
- Liabilities for acts of intentional or dishonest wrongdoing
- Claims related to unemployment benefits
- Claims related to workers’ compensation
Highly-Publicized Examples of EPLI Insurance at Work
- Applebee’s settled a sex-based harassment and retaliation lawsuit filed by a transgender hostess. The EEOC filed the federal lawsuit on behalf of the hostess claiming, “Employees repeatedly stood in groups gawking, laughing and pointing at the aggrieved individual, and made crude disparaging remarks about her being transgender.” See: Applebee’s settles sex discrimination lawsuit filed by transgender hostess
- Uber Technologies Inc. agreed to pay $10 million to settle a class-action lawsuit brought by two women engineers who accused the company of gender and race discrimination. See: Uber Settles Employee Gender, Racial Bias Lawsuit for $10 Million
- A federal lawsuit alleged that managers and coworkers at Sam’s Club made repeated harassing and discriminatory comments toward a transgender woman employee, referring to her as “it” and “thing.” She also claimed that she was wrongfully terminated in 2015 after filing complaints. See: Kannapolis trans woman sues Sam’s Club for discrimination, wrongful termination
- Two former Nike employees sued the sports apparel company, claiming a culture of sexual harassment and gender bias at Nike that left women demeaned and underpaid. See: Ex-Employees Sue Nike, Alleging Gender Discrimination
What Is the Difference Between Claims-Made vs. Occurrence Policies?
When it comes to EPLI, many people get confused about the difference between claims-made and occurrence policies. When discussing liability policies, the difference is all about timing and what the so-called trigger is for the coverage. It’s a question of both what must occur in order for the policy to respond and when it should occur.
Still confused? The main difference is what policy period a claim is paid on if and when a claim occurs. Let’s look at an example. Imagine there was a wrongful act that occurred in 2004, but was not found out about until 2018, then:
- With an occurrence policy, the claim would be paid under the 2004 policy – with the limits and deductibles of the 2004 policy.
- With a claims-made policy, the claim would be paid under the 2018 policy – with the limits and deductibles of the 2018 policy.
What’s most important in a claims-made policy is the so-called “retroactive date.” The retroactive date is the start date of the claims-made policy that you either bought or renewed. This means that you are covered for any incident, as long as it occurred either on or after the retroactive date and was reported to the insurance company within the policy period.
Perhaps the most logical correlated factor to EPLI risk is organizational size. All things equal, the more employees a company has, the more likely it is that one of the employees will find some discriminatory basis for a lawsuit. That said, it’s best for companies to consider the strength of their HR policies and procedures as a means to prevent claims and reduce risks.
In reality, many insurance underwriters are looking intensely at your organization’s investment in HR talent, policies, and procedures. Organizations that have not displayed this commitment represent a more significant risk and will be charged more than their peers, or worse off be denied coverage altogether. EPLI pricing is an exercise in evaluating the strength of HR and it’s policies and procedures, not simply a tiered employee count approach. Naturally, your claims history will affect premiums as well. If you haven’t had any claims over the last three years, your premium will be lower.
Tips for Preventing Employee Lawsuits
While there is certainly no way to truly prevent employment related lawsuits, there are things that you can do as a business owner to minimize the risk and decrease the chances of an employee claim.
One obvious tip is to have a comprehensive handbook describing proper behavior at the workplace and never deviate from its policies. Be sure to educate your employees and provide adequate training.
If you are creating workplace behavior policies, be sure to enforce zero-tolerance related to harassment and discrimination. Don’t forget to make it easy for people to report problems as well. Complaint investigation is also very important. Take all employment discrimination complaints seriously and launch a thorough investigation that gets resolved quickly.
Now that you have a better understanding of EPL insurance, you may be wondering how all of this affects your business and where to go from here.
Having a quality EPL insurance policy in place and an expert broker who can help you navigate the terms and conditions will protect you financially and empower you to resolve employment matters quickly and confidentially.
Embroker is the easiest way to intelligently insure any business. We’re here to help!