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Ask the Hotline | Employment Practices Liability Insurance

July 12, 2019
What is employment practices liability insurance?
Employment Practices Liability Insurance (EPLI) covers employers for wrongful acts arising from employment. Typical examples of what is covered in the policy include:
  • Wrongful termination, 
  • Discrimination
  • Sexual harassment 
  • Retaliation
  • Negligent decisions regarding compensation, promotions or hiring
  • Negligent evaluation
  • Negligent supervision of employees
  • Infliction of mental or emotional distress
  • Invasion of privacy
  • Discrimination based on legally protected class status 
  • Wrongful demotion or disciplining of an employee
  • Wrongful termination of an employee or implied contractor
  • Mismanagement of employee benefits
  • Deprivation of opportunity
At the same time, it is important to be aware of what an EPLI policy does not cover, including: 
  • Penalties
  • Punitive damages 
  • Civil fines
  • Criminal fines
  • Unpaid wages
  • Rest and meal times
  • Liabilities for acts of intentional or dishonest wrongdoing
  • Property damage
  • Claims of bodily injury
  • Bullying
  • Claims related to use of social media
  • Claims related to unemployment benefits
  • Claims related to workers' compensation
  • Claims related to The Consolidated Omnibus Reconciliation Act (COBRA)
  • Claims related to The Employee Retirement Income Security Act (ERISA)
  • Claims related to The Worker Adjustment and Retraining Notification Act (WARN)
  • Claims related to The National Labor Relations Act (NLRA)
  • Actions that occurred outside of the United States.
Some policies require the employer to use a certain law firm. This  may be problematic if your company has an existing relationship with a firm but many AIM members have negotiated with their EPLI carriers and are able to continue to  use their existing law firms. 
An EPLI policy will typically cover directors and officers, management personnel, and employees.  
EPLI policies are typically written on a claims-made basis, meaning that claims will only be covered when both the incident in question and any claims related to it occur while a policy is active. Even if an incident took place while a policy was in effect, if a claim related to it is filed after the policy in question expires, that claim is not covered under the policy. The statute of limitations for Massachusetts discrimination cases is 300 days, which could easily be a new policy year. 
The EPLI policy may also contain "shrinking limits" provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduces the policy's limits. 
While an employer may buy EPLI as a stand-alone policy, most carriers package it as part of other policies so it is worth a conversation with your general liability or workers compensation carrier to see if it offers EPLI.
The limits of policies typically run from $1 million to $25 million in total coverage. Settlements, judgments and legal defense costs are typically included in policies' aggregate limits. 
Premiums for EPLI are based on factors such as employee count, type of business, hiring and firing policies and any history of prior legal action against a firm. Any insurer is also likely to want assurance that the employer has adequate personnel policies before providing an estimate for EPLI coverage.
Any employer thinking about EPLI needs to shop around and speak with colleagues to learn from their experience with a particular carrier. The AIM HR Roundtable is a good starting place to learn more about it. 
AIM members with questions about this or any other HR-related issue may call the AIM Employer Hotline at 1-800-470-6277.
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