Employment practices liability insurance (EPLI) coverage is on the rise – “with the biggest growth coming from small and midsize companies,” according to a recent Washington Post article. The barrage of high-profile sexual misconduct accusations in the news is no doubt fueling the take-up rate, which is already at 41 percent for large firms.
In particular, the Post article referenced Nationwide:
[The company] recorded a 15 percent increase in EPLI sales between fall 2016 and September 2017 – a stretch that coincided with the ousters of Fox News’s Roger Ailes and Bill O’Reilly.
See below for answers to these Frequently Asked Questions:
- What does an EPLI policy cover?
- Why aren’t employee-related lawsuits and claims covered under a general liability policy?
- How are EPLI premiums determined?
Employment Practices Liability Insurance
Q: Are your business and its assets adequately protected?
A: It can happen to ANY business – even yours! Every day, your business, whether big or small, faces the reality of being the target of a lawsuit filed by a past, present or potential employee. You can’t monitor every aspect of an employee’s hire or termination, or every conversation taking place in the office or warehouse. As a result, an off-color joke told in the employee lounge; an employee you had to fire; or the potential employee you chose not to hire, are all circumstances that could lead to a potential lawsuit. Even if a claim is frivolous or fraudulent, defending it can be expensive.
Q: How do I protect my business and its assets from employee related lawsuits or claims?
A: By purchasing Employment Practices Liability Insurance (“EPLI”). An EPLI policy provides coverage against claims made by past, present and potentials employees, including claims for discrimination (age, sex, race, etc.), sexual harassment, wrongful termination, and a variety of other employment related allegations. Importantly, an EPLI policy will cover legal costs and expenses, whether your business wins or loses the suit.
Q: Aren’t these types of claims covered under my general liability policy (“GL Policy”)?
A: Claims for discrimination, wrongful termination, sexual harassment, etc., are rarely covered under a GL Policy.
Q: Why aren’t they covered under my GL Policy?
A:For the following reasons:
-The majority of employment related claims aren’t “accidental”, and therefore aren’t considered an “occurrence” which triggers coverage under the GL policy;
-“Injuries” suffered in such cases don’t constitute “bodily injury” or “personal injury” as defined in the GL Policy; and
-Many GL Policies contain specific employment related practices exclusions for claims “arising out of or in the course of employment”.
Q: Can you provide examples of a typical claim?
A: Typical claims include allegations that an employee was fired because of age, sex, race or religion, or that he or she was harassed or required to work in a hostile environment.
Q: Would an EPLI policy cover claims made my clients, vendors or other non-employees?
A: While some EPLI policies include “third-party” coverage, most do not. However, “third-party” coverage can be purchased for an extra premium, and covers liability for discrimination and sexual harassment claims by clients, vendors and other non-employees.
Q: Can an EPLI policy be tailored to meet the specific needs of my business?
Q: What factors would affect the cost of EPLI coverage?
A: The average cost of EPLI coverage depends on:
-The size and location of your company;
-The type of business;
-The number of claims and lawsuits previously filed against the company;
-The number of employees you have; and
-How long you have been in business.
Some additional EPLI facts and statistics*:
-An employer is more likely to have an employment claim than a property or general liability claim;
-Defense of an average EPLI case, through trial, costs more than $45,000;
-The average amount paid for an out-of-court settlement is $40,000;
-The median compensatory award in EPLI cases is $218,000;
-67% of employment cases that litigate result in judgments for the plaintiff;
-10% of awards in cases involving discrimination and wrongful termination are in excess of $1,000,000
* Society for Human Resource Center
Q: How do I know what I should do?
A: Making such a personal decision about your options is yours – and yours alone under the law. As your professional independent agent, I can help your company craft an EPLI policy which protects those risks which are unique to you and your business. Our agency’s job is to help provide you with information on these choices so that you can make informed decisions.