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Is Employment Practices Liability Insurance for You?

January 29, 2019
The AIM Human Resource Roundtables last month produced conversations about employment practices liability insurance (EPLI) and how companies use it as part of their strategy for fighting lawsuits.
What is EPLI?
Employment Practices Liability Insurance covers employers that facing charges of wrongful acts arising from some aspect of employment. The policies usually insure the actions of directors and officers, management personnel, and employees. 
A typical EPLI policy covers wrongful termination, discrimination, sexual harassment and retaliation. The policies often cover claims of other types of inappropriate workplace conduct as well, including defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation.
EPLI typically does not cover bodily injury, property damage, and intentional/dishonest acts. 
Is it worth it? 
Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy. EPLI is usually written on a claims-made basis, meaning the incident resulting in the claim had to occur during the coverage period. This is important to remember since statutes of limitations (for example, Massachusetts Commission Against Discrimination is 300 days) may continue beyond the policy year. If the policy is dropped prior to the lawsuit, it will not offer any legal protection. 
But some questions to consider apart from cost and scope of coverage of the policy include:
  • Has the business been sued recently? 
  • Would insurance have helped manage and/or pay for the claim?
  • What is the percentage of employee turnover in a year?
  • Is a change in the number of employees (rapid hiring or downsizing) causing workplace discontent? 
These factors raise the threat of a lawsuit against a company going forward. For example, if the prior lawsuit was high profile within the company, will other employees begin to consider the legal option? Are the company’s rapid personnel transitions leaving some employees feeling left out or less involved?
Some questions to ask in searching for a policy include: 
  • Which employment issues are covered? 
  • Which ones are not covered?
  • Is there a deductible? How much? 
  • Can you get an extension to a policy to cover claims that arose during the policy but were brought when the policy lapsed? 
  • If litigation is involved, who selects the law firm? (Important if you have an existing relationship with an employment-law firm.)
  • Does the policy cover social-media related issues (i.e. one of your employees posts something leading to a lawsuit)? 
  • Does it cover third-party claims?
  • Does it cover breach-of-privacy claims?
  • What about the coverage of new laws adopted during an EPLI policy year?
Spend a little time on the internet checking out the possible options or speaking with other HR professionals prior to speaking with your broker. 
Members may call the AIM Employer Hotline at 1-800-470-6277 with questions about this or any HR-related issue.
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