What is Employment Practices Liability Insurance (EPLI)?
Employment Practices Liability Insurance (EPLI) provides essential protection for businesses against lawsuits related to employment practices. In recent years, claims filed under EPLI have increased significantly, making this coverage more crucial than ever.
If you've had to terminate an employee, you may face potential litigation. EPLI policies cover claims made by former employees and assist with legal expenses, regardless of the lawsuit's outcome.
Can You Provide a Claims Scenario?
Here are a few examples illustrating the importance of EPLI:
Wrongful Termination Claim: You decide to terminate an employee who has consistently failed to meet sales quotas. Months later, you receive a lawsuit alleging wrongful termination based on age discrimination. Despite the claims being unfounded, insufficient documentation regarding the employee's performance results in a settlement of $630,000.
Racial Discrimination Case: An employee at your restaurant refuses service to a patron, using racial slurs. Although you trained your staff against such behavior, witnesses confirm the incident. The victim sues for racial discrimination, leading to a settlement of $48,000.
Gender Discrimination Allegation: A former employee claims she was passed over for a promotion and raises because of her gender, while her male colleagues were favored. The defense costs for this case exceed $100,000.
These scenarios highlight that even with robust employment practices in place, legal issues can arise.
Key Considerations Before Applying for EPLI
Cost of EPLI: EPLI can be expensive, with premiums sometimes comparable to or exceeding those of your business owners insurance policy. It's vital for small business owners to carefully assess the risks and costs associated with this coverage. Review your financial situation to determine if EPLI is a viable option.
Application Preparation: When you're ready to apply for EPLI, prepare your financial statements and employment handbook ahead of time, as many carriers require these documents during the application process.
Policy Options: EPLI is occasionally available as an add-on to your business owners insurance policy, but this usually covers only first-party claims. Standalone EPLI policies often provide more comprehensive coverage, including both first- and third-party claims.
If you have any questions or need assistance with EPLI, our team is here to help you navigate your options and protect your business from employment-related claims.