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Do You Need Employment Practices Liability Insurance?

Do You Need Employment Practices Liability Insurance (EPLI)?

Do You Need Employment Practices Liability Insurance?

Hiring even one employee exposes your organization to new risks. From managing payroll and benefits to handling workers’ compensation, every hire introduces potential liabilities. To protect against many employment-related claims, businesses can purchase Employment Practices Liability Insurance (EPLI).

EPLI is often available as a standalone policy, though some business owners policies (BOPs) offer it as an endorsement for an additional premium.

In a post-COVID world filled with increased employment disputes and management challenges, EPLI has become a “must-have” rather than a “nice-to-have.”

What Kinds of Claims Does EPLI Cover?

The Equal Employment Opportunity Commission (EEOC) reported over 67,000 claims in 2020 — not including state or local agency complaints. EPLI can help protect your business from a wide range of legal actions, including:

  • Discrimination (age, race, religion, disability, etc.)
  • Equal pay violations
  • Failure to hire or promote
  • Negligent infliction of emotional distress
  • Negligent supervision
  • Retaliation
  • Sexual harassment
  • Wrongful termination

Even access to an employee’s genetic information can result in a claim. The fastest-growing category? Retaliation claims, followed by disability, age, religion, and national origin discrimination.

The True Cost of EPLI Claims

Settlements are just the tip of the iceberg. EPLI claims often involve high defense costs, including attorney fees, severance pay, and expert witnesses. Without proper coverage, these costs can seriously strain your business’s finances.

The Benefits of EPLI Coverage

Aside from financial protection, EPLI providers often offer value-added services like:

  • Employment assistance hotlines
  • Online HR resources
  • Policy review and drafting templates

These tools help you prevent claims before they arise and take proactive steps in your HR processes.

What to Consider When Shopping for EPLI

Coverage isn’t standardized — insurers write their own EPLI forms, and exclusions vary. Watch out for policies that exclude:

  • COVID-19 related claims
  • Wage-and-hour violations
  • OSHA complaints
  • Punitive damages

This variability makes it critical to work with a knowledgeable agent who can help compare options and find the right coverage for your needs.

Defense Within vs. Outside Policy Limits

One important detail is whether your policy provides “defense within limits” or “defense outside limits.”

If your $1 million policy includes defense within limits, legal costs reduce the amount available for settlements. With defense outside limits, legal expenses are paid separately — preserving your full $1 million for settlements. This distinction can be crucial during costly litigation.

Why You Need a Trusted Advisor

EPLI is a complex and essential form of insurance for today’s employers. Your local Trusted Choice® Independent Insurance Agent can help you:

  • Understand different policy options
  • Compare coverage exclusions and benefits
  • Select the right insurer based on your industry and risks

Talk with your Trusted Choice agent today and ensure your business is protected from the growing threat of employment-related lawsuits.