Understanding Employment Practices Liability Insurance (EPLI)

Insights from Our Recent Claims Management 101 Webinar

In our recent Claims Management 101 webinar, Senior Risk Management Claims Consultants Valerie Childs and Daniel Tompkins shared the importance of Employment Practices Liability Insurance (EPLI) and how it can safeguard a business from costly litigation risks. EPLI is crucial for all businesses, providing coverage for a range of allegations made by employees or non-employees, including wrongful termination, discrimination, sexual harassment, retaliation, and failure to promote. It’s important to understand the difference between claims-made and occurrence-based policies. In a claims-made policy, the date of loss is when the claim is filed, while in an occurrence-based policy, it’s the actual date of the event.

Key Points of EPLI Coverage

1. Discrimination: Covers claims based on age, race, gender, religion, disability, or other protected characteristics.
2. Harassment: Protects against claims of verbal, physical, sexual, or other forms of harassment.
3. Wrongful Termination: Includes claims of retaliation or breach of contract.
4. Failure to Promote or Hire: Applicants can file claims if they believe they were treated unfairly.
5. Privacy Invasions: Unauthorized access to employee personal information.
6. Wrongful Discipline: Disciplinary actions without just cause or excessive punishment.
7. Breach of Contract: Failure to follow company policy.
8. Defamation: Lawsuits related to false or damaging statements about an individual.

Exclusions and Timely Reporting

EPLI policies typically exclude claims related to workers’ compensation, wage and hourly claims, criminal acts, and intentional acts. Timely reporting of claims is critical, as coverage can be denied if a claim is not reported promptly or if the insured had prior knowledge of the claim. Employers should report potential claims as soon as they arise to avoid coverage issues.

Management Liability Packages

EPLI can be part of a management liability package, combining directors and officers (D&O) liability, employment practices liability, and fiduciary liability. It’s advisable to have separate limits for each coverage to avoid exhausting the policy limits on one claim. Defense costs should be written outside of the policy limits to ensure funds are available for both defense and potential damages.

Handling Potential EPLI Claims

When handling potential EPLI claims, seek guidance on whether to put the carrier on notice for record only or to file a claim, especially if the situation involves the Division of Human Rights or the Equal Employment Opportunity Commission (EEOC). These agencies conduct thorough investigations, and claims filed with them are often substantiated. Employers must respond within specific deadlines to avoid coverage issues.

Mitigating Risks

To mitigate risks, have clear policies, regularly updated handbooks with signed acknowledgments, consistent HR practices, effective employee training, and thorough investigations and responses to complaints. Consulting with an employment attorney, as necessary, can provide additional support. OneGroup offers HR Consulting and risk management services to help businesses navigate these challenges.

Conclusion

EPLI is essential for all businesses, providing protection against significant financial reputational damage. The cost of EPLI is relatively low compared to the potential expenses of a lawsuit. Discuss EPLI with your agent or client advisor to understand its value for your business. If you have any questions, please feel free to reach out to us. We’re here to help guide you through the complexities of EPLI.

Valerie Childs
Sr. Risk Management Claims Consultant
[email protected]
315-350-9964

Daniel Tompkins
Sr. Risk Management Claims Consultant
[email protected]
518-952-7984

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.

Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.