Employment Practices Liability Insurance goes hand in hand with workers’ compensation to provide broad coverage in the workplace

Many people recognize that workers’ compensation is an important insurance policy to have for a business, partly because it’s required for most businesses. Employment practices liability insurance on the other hand is often overlooked or discarded as unnecessary. 

A good insurance agent will always discuss EPLI, as it’s often shortened to, with their commercial insurance clients. So what is employment practices liability insurance exactly, and why does your business need it? 

What is Employment Practices Liability Insurance? 

EPLI is a type of commercial insurance policy that covers your business if it’s sued by one of your employee’s for a number of potential workplace violations, real or perceived. Whereas worker’s compensation covers physical injuries, EPLI covers more intangible wrongs or violations, such as:

• Sexual harassment
• Discrimination in any form
• Wrongful termination
• Breach of contract
• Wrongful demotion or prevention of advancement
• Mismanagement of employee benefits

That’s not the complete list of things covered by EPLI, but it shows you the types of claims that it covers. 

There is normally one important difference between EPLI and other types of commercial insurance policies. Employment practices liability policies are called a claims-made policy, instead of the occurrence-based policy that exists on general liability, commercial property, commercial and personal auto insurance, and most other types of insurance policies. 

This just means that in order for your business to have coverage under your EPLI policy, the policy will have to be active and in-force when the incident in question happened AND when the claim is filed. This is important because businesses often cancel all of their insurance if they close up shop, but an EPLI policy may be worth keeping in force. Discrimination and sexual harassment claims in particular sometimes are not brought forth for a few years after they happen. 

Does My Business Need Employment Practices Liability Insurance? 

EPLI isn’t normally an insurance policy that’s required from a lender or by the state that your business resides in, but that doesn’t mean it’s not an important insurance policy to consider. EPLI policies typically aren’t the cheapest type of insurance out there, but it’s only because these types of claims do happen quite frequently and are costly. 

Rates are largely determined by the industry that your business is in and the number of employees that you have. It doesn’t cost anything for you to get an EPLI quote, and your business may even be eligible for a discount if you bundle it with other types of commercial insurance policies. 

Only you can determine if it’s worth it to buy an EPLI policy, but the financial and reputational cost of a lawsuit brought by one of your employees is likely to be significantly greater than the cost of an EPLI policy.