Whether from a past, present, or prospective employee, every business — large or small — faces the reality of being faced with a job-related claim or lawsuit. In addition, legislation such as the Family Medical Leave Act have made it even more important for business owners to protect themselves with a form of business insurance referred to as Employment Practices Liability Insurance, or EPLI.
What is Employment Practices Liability Insurance?
An EPLI policy provides insurance coverage in the event of lawsuits and claims brought forth against the business, or its owners, officers, directors or employees. An EPLI policy typically provides protection that covers:
- Sexual harassment
- Wrongful discipline or termination
- Age, gender, race, disability, or other forms of discrimination
- Negligent hiring
- Negligent promotion
- Negligence in compensation
- Breach of employment contract
- Privacy invasion
- Mental anguish or emotional distress
- Mismanagement of employee benefits
- Slander or libel
The majority of Employment Practices Liability Insurance policies are written on a per-claim basis. This means that in order for a claim to be covered, it is necessary to notify your insurance company while the EPLI policy is in effect. Further, the event that triggered the claim must have occurred during or after the EPLI policy effective date. In certain circumstances, events occurred on a retroactive date may be covered. The exact coverage and cost of EPLI policies vary depending on the size, type and risks of your California business.
Generally, claims resulting from mergers, workforce reductions and acquisitions are limited or excluded from coverage. Furthermore, most EPLI insurance policies exclude claims involving criminal conduct. EPLI policy coverage is typically excluded for violations of the Occupational Safety and Health Act (OSHA), Fair Labor Standards Act, State Employment Law and Consolidated Omnibus Budget Reconciliation Act (COBRA) laws.
Although some directors’ and officers’ insurance policies provide coverage for employment practices liability, in some cases this coverage is limited only to directors and officers and can have more employment practices liability exclusions than a typical stand-alone EPLI policy.
The headaches and legal expenses incurred with employment practices claims, such as discrimination or wrongful termination, can be overwhelming. Employment Practices Liability Insurance provides a solution to these worries. Even though business owners strive to be non-discriminatory and fair in all employee dealings, miscommunication, gender gaps and unintentional things happen. EPLI coverage is a necessary defense against these types of employment claims.