What is EPL insurance?

EPL insurance protects businesses from the high costs and disruptions of employment claims, covering legal fees and settlements. Safeguard your company from claims of harassment, discrimination, and wrongful termination with comprehensive EPL insurance.

By Brad Nakase, Attorney

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Table of Contents
1. Introduction
2. What Is EPL Insurance?
3. What Is an Employment Claim
4. The Benefits of EPL Insurance
5. How to Choose EPL Insurance

Introduction

Did you know that many types of employment claims do not have a cap? Judges and juries can award settlements well into the 6 figures to successful plaintiffs. And then there are the legal fees! The legal fees of an employment claim can be crippling, even if you are a fair employer. More employers are turning to EPL insurance to protect their business from the high costs and disruptions that employment claims (whether valid or false) can bring.

What Is EPL Insurance?

EPL Insurance (or Employment practices liability insurance) is designed to protect your business if a current or former employee makes an employment claim against you. Employment claims can result in astronomical penalties and even employers who do everything right can wind up with huge legal fees from proving their innocence.

This is why employers turn to EPL insurance; the insurance will cover the cost of your legal fees and any penalties you may face. Check the coverage of the EPL insurance policies you are considering, but most will cover employment claims for harassment, discrimination, and wrongful termination.

What Is an Employment Claim

An employment claim is a claim that employees or even people outside of your business makes against you as an employer. It is your responsibility to keep your employees safe at work. It is also your responsibility as an employer to ensure that your employees act in an appropriate and respectful manner to people they come across in their work. So if a member of your staff started harassing a customer (like accessing a client record to get their number and send lewd messages), then the customer could sue you as the employer.

Some examples of employment claims include:

  • Wage and hour violations
  • Discrimination against protected characteristics (including age discrimination)
  • FMLA violations
  • Harassment
  • Sexual harassment
  • Wrongful failure to promote
  • Wrongful disciplinary action
  • Wrongful termination
  • Retaliation

All of these (except for wage and hour violations) could be brought against you by either employees, customers, or vendors.

The Benefits of EPL Insurance

Employment claims are on the rise, and not all of them are valid. Just like businesses can get insurance to protect against natural disasters or public indemnity, they can get EPL insurance to protect them in the event that one of their employees sues them.

  • Protection from claims from multiple parties – EPL insurance is particularly important because employment claims can arise from not just your employees but vendors, customers, and business delegates too.
  • Protection from many different types of employment claims – There are numerous types of employment claims that could be brought against you. The list above are just the most common examples of employment claims.
  • Access to legal resources – Many EPL insurance companies will provide the employers they cover with access to resources that will help them to avoid claims in the first place. Depending on the EPL insurance firm, this may include guides on how you can self-audit your policies and procedures to avoid claims, or it may include legal consulting on your policies. Many EPL insurance firms will also provide templates for employee handbooks and policies so that you can take legally sound examples and tailor them to your company.
  • Coverage for legal fees and settlements – For many types of employment claims, there is no cap on the settlement that a judge or jury may award the plaintiff. In addition, employers may rack up large legal fees to go with the settlement awards. EPL insurance covers both of these costs.

How to Choose EPL Insurance

As with every other type of business insurance, coverage can vary greatly between different EPL insurance firms and policies. Read the coverage of the EPL insurance policies to ensure that your company is covered in the event of an employment claim. These claims are more costly than you may expect. For example, the average FMLA lawsuit settlement is $80,000. Wrongful termination settlements can easily reach as high as $450,000.

It is worth consulting with your company’s lawyer to determine the EPL insurance coverage you require. They will be able to recommend what EPL insurance will be best for your business.

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