employment practices liability insurance — do you need it?
There are various policies a business may decide to carry when reviewing their risk profile. The type of coverage your business invests in, depends on a few different factors. Almost all businesses with employees will want some kind of Employment Practices Liability Insurance (EPLI). Peter Katkov, benchmark’s Commercial Lines Broker explains what EPLI is, and why it’s important for businesses in the video below.
what is EPLI?
EPLI is an insurance policy that covers the costs of wrong actions performed during a person’s employment period.
These policies cover an array of wrong actions regarding:
- Wrongful termination
- Sexual Harassment
- Hostile work environment
- Deprivation of career opportunity
Allegations can come from an ex-employee, a current employee, or a prospective employee that you didn’t hire. Typically, with an EPLI policy in place, legal costs and settlements are covered.
do you need EPLI?
All businesses with employees are vulnerable to the risk of an employee submitting a claim against your company. Small businesses, especially, are more susceptible to employment claims because they do not have the same legal support larger companies do.
When considering if your business should invest in EPLI, ask yourself, “can I afford not having insurance if a lawsuit arises?”
reducing your risk of an employee claim
In addition to investing in EPLI coverage, businesses should have standard practices and educational opportunities for managers and employees in place to reduce the risk associated with employment practices. A few examples of educational materials to provide your staff include:
- Effective hiring and screening programs to avoid discriminatory hiring.
- Create handbooks and make corporate policies clear to everyone.
- Clearly explain acceptable and unacceptable workplace behavior.
- Have steps in place for employees to report unacceptable behavior.
- Ensure all communication and actions taken are documented
why use EPLI?
EPLI is beneficial for businesses to cover the financial costs associated with legal action. Attorney fees and settlement costs are reimbursed by the policy, which means your business does not have the unexpected financial burden of paying off legal fees that could arguably cause a business to close down.
how much does EPLI cost?
The cost of EPLI depends on a few different factors:
- Company size
- Type of business
- Number of employees
- History of lawsuits
- Employee turnover percent
- What rules and regulations you have in place
This specific line of coverage has been experiencing increasing costs, tighter underwriting guidelines, and increasing deductible structures driven primarily by:
- Class actions
- Large class action suits
- The fact that legal precedent and case law support an employee over an employer.
In turn, this puts a lot of pressure on the policyholder that’s trying to manage their insurance costs.
EPLI isn’t the only coverage that is experiencing this pressure. In one of our most recent articles, we discuss what you should expect from your commercial insurance in the coming year, including where your premiums may increase and where they may remain stable.