The importance of employment practices liability coverage

Every employer, no matter how small, faces the specter of being sued by a past, present, or prospective employee at some time.

Employment practices claims have become so widespread that businesses are more likely to have an employment practices liability claim than a general liability or property loss claim.
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Nearly three-quarters of all litigation against corporations today involves employment disputes. The cost associated with an employment practices claim can be significant.

In 2018, the Equal Employment Opportunity Commission resolved 90,558 charges of discrimination and recovered about $505 million in remedies for discrimination plaintiffs. In addition, the EEOC recovered nearly $70 million for victims of sexual harassment through litigation and administrative enforcement that year, up roughly 50% from $47.5 million in 2017.

The massive jump in sexual harassment claims and recoveries is a direct result of a surge in lawsuits since the start of the #MeToo movement, which has emboldened many victims to come forward and file complaints.

Keep in mind, the above are just penalties and do not include defense costs, which can exceed $100,000 per claim for employers.

For these reasons and more, employment practices liability insurance is crucial for any employer. The risks of being sued by an employee for discrimination or harassment have increased substantially.

Employers need EPLI coverage because comprehensive general liability policies and workers' comp policies exclude employment-related claims. 

What does employment practices liability insurance (EPLI) cover? 

EPLI policies cover business owners as well as directors, officers, and managers, and include:

• Defense costs (court fees, attorney fees, and related costs).
• Payment of settlements and/or judgments up to the policy's limits.
• Any fines or penalties levied by government agencies.

Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients. 

Types of actions covered include:

• Discrimination based on gender, race, national origin, religion, disability or sexual orientation
• Sexual harassment or other unlawful harassment in the workplace
• Wrongful termination
• Failure to employ or promote
• Retaliation
• Employment-related misrepresentation
• Failure to adopt adequate workplace or employment policies and procedures
• Employment-related defamation or invasion of privacy
• Negligent evaluation of an employee
• Wrongful discipline of an employee
• Employment-related infliction of emotional distress.

NOTE: Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.

The cost of employment practices liability insurance

EPLI claims can be costly. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000.

Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns. 

Contact your account executive for help in gauging your EPLI coverage needs.