All employers should have employment practices liability insurance, otherwise known as an EPLI insurance policy. This is different from a workers compensation policy or a commercial general liability policy, or even a property or auto policy. The EPLI policy provides coverage for wrongful acts arising from the employment process. While most large companies have employment practice liability insurance, few new, smaller, and medium-sized companies have EPLI, or an adequate EPLI insurance policy.
Size Doesn’t Matter.
Most large companies are either self-insured or have an employment practice insurance coverage in place. As important, they also have an entire department prepared to handle an employment dispute or lawsuit. Large companies also have a team of attorneys ready to advise them on their hiring, firing, and discrimination prevention practices. Large companies also have an employee handbook outlining expectations and rules, and progressive discipline up to and including termination for employment policy violations.
In contrast, many small and medium businesses, especially those that have been in existence for a short while, do not have EPLI policies. Compounding the problem, the smaller and newer the company is, the less likely it is to have a department prepared to handle employment matters, the less likely it is to have an attorney who can advise on their employment preventative practices, and the less likely they are to have an updated employee handbook detailing the policies and procedures regarding hiring, disciplining, and terminating an employee.
As a result, smaller and newer companies are more vulnerable to employment-related claims.
The EPLI Policy.
Employment Practices Liability Insurance (“EPLI”) is a type of liability insurance covering wrongful acts arising from the employment process. The types of claims covered by EPLI policies may include:
- Failure to employ or promote;
- Violation of potential employee screening laws;
- Wrongful termination;
- Discrimination (based on federal and state protected rights);
- Sexual harassment; and
- Retaliation.
The EPLI policies on the market today are varied. Some policies are broad enough to protect the employers from claims in the state and/or federal agencies (such as the EEOC and the state Human Rights Commission) all the way through trial; some limit the coverage to defense costs, some provide coverage for only agency claims, and some, perhaps all, limit coverage to liability only – not extending coverage to punitive damages liability.
The EPLI policy can be a stand-a-lone policy, or in conjunction with CGL or a workers compensation policy.
Best Practices
The below four items are essential in the current climate to make sure your company is prepared for employment-related claims:
- Have an EPLI policy or rider that protects against employment-related claims.
- Have a well-drafted handbook including policies and procedures that all employees are required to follow.
- Have a department that is both proactive in prevention as well as the handling of claims.
- Have a qualified attorney to review your policy and procedures, and to advise on issues as they arise.
If you have any questions regarding employment liability claims, workplace policy practice or procedures, or specific problems in your workplace, please contact Kristin Tauras at McKenna Storer.
Kristin devotes a significant amount of her practice to employment and coverage law, and is available to consult with your company.