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Employment Practices Liability Insurance- An often overlooked insurance policy

Virtually every business has insurance to cover a fire, theft, automobiles, and general liability exposures. Did you know if is far more likely that a company will face an employee lawsuit than the terrible effects of a fire? Almost 75% of all litigation against companies today involved employment disputes, and the typical expense of a lawsuit exceeds $250,000 in judgments, attorney’s fees and costs.

Over the past ten years, an average of more than 79,000 EPL charges have been filed annually with the EEOC, resulting in more than $2.2 billion in benefits for complainants. Monetary awards increased 73% between 1996 and 2004, when the total amount awarded topped $250 million.

Not only are the numbers of employment-related claims increasing, but so is the potential financial risk to your business. Defending a wrongful termination or discrimination claim whether you are innocent or guilty, or even if the claim is groundless or fraudulent can be expensive. The potential exposure for a money damages award threatens your company’s financial resources.

First off, EPLI coverage is not included in general liability coverage. EPLI policies are issued either as a stand-alone policy or in conjunction with another insurance policy (such as part of a package policy or directors and officers liability insurance). These policies provide insurance coverage for the cost of defending a claim and indemnity for liability.

EPLI covers many different types of exposures including:

– Sexual Harrasment
– Wrongful Termination
– Discrimination
– Statue Violation/Federal employment laws
– Negligent Hiring
– Negligent Supervision
– Negligent Promotion
– Negligent Retention
– Breach of Contract
– Loss of Consortium
– Emotional Distress
– Invasion of Privacy
– Drug Testing
– Mental Anguish
– Libel
– Slander

We often hear from business owners that they don’t need this coverage because their employees would never sue them. Are those business owners surprised when they are sued and disappointed that they didn’t have a policy in place to cover them. Don’t make this mistake. This is a growing area and the premiums are very reasonable for the protection they provide.

All employers no matter what size should develop preventive strategies to address exposure to employment lawsuits. Part of any preventive strategy should be policies and procedures that promote an issue-free workplace. However, no program is fail-safe. Employers must take action to limit this exposure which is undeniably a cost of doing business. Practical and cost effective, EPLI is on option to address this risk.

Let’s look at a claim example:

  • A terminated employee sues for harassment, wrongful termination, retaliation, and discrimination. A female employee alleged that a supervisor made abusive and sexually explicit comments to her, as well as sexual advances. She was terminated soon after. She sued the company and two managers alleging sexual harassment, intentional infliction of emotional distress, wrongful termination, retaliation and sex discrimination for $275,000, plus recovery of legal fees. In defense, the company stated she was a problem employee (tardy for work, conflicts with managers, patchy performance, talked about her sex life, made vulgar comments) and her termination was part of a broad reductions in force. During discovery, it came to light that management tolerated sexual jokes around the office but assumed no one was offended.


  • A court panel ordered the company to pay the plaintiff approximately $100,000 plus legal fees. The company also accrued more than $30,000 in defense costs.

We have several tools available for a business to understand their exposure as well as improve their risk management in this crucial area. Don’t overlook this coverage because the odds are against you in having an employee sue you.