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What You Need To Know About EPLI Coverage

What You Need To Know About EPLI Coverage

Imagine for a moment that your business receives a letter from an attorney threatening legal action.  It’s one of the 10 most common HR related legal claims, meaning it falls under one of the many hats you’re wearing.  You’re now tasked with limiting the potential impact this legal claim could have on your business.  Typically these lawsuits end in settlement which means considerable capital expenses.

Fortunately there is a way to protect your business through risk management and practical insurance coverage.  Let’s explore some examples of claims that are commonplace in today’s evolving business world and the coverage you can implement.

Examples Of Claims That EPLI Could Have Covered

  1. A recently terminated 42 year old employee is suing for age discrimination, alleging that only employees under 40 are being retained by your company.
  2. An administrative assistant who recently quit alleges that instances of sexual harassment she reported to management went unheeded, creating a hostile work environment.
  3. A group of  job applicants alleges race discrimination because they were not hired to work on an upcoming building contract.

Lawsuits like these are commonplace, particularly in a tough job market.  They are the sorts of claims that could bankrupt your business if you don’t have the money to offer a sizable settlement or to fight a prolonged legal battle.

The Basics of EPLI

The specific insurance policy is called Employment Practices Liability Insurance (EPLI).  For seasoned entrepreneurs, the term is well known and the coverage is as standard as General Liability or Workers Comp.  EPLI is a very broad form of coverage that protects your business from legal action and lawsuits due to the following Human Resources related incidents:

  • Harassment or discrimination due to age, gender, disability, sexual, religion (and others)
  • Wrongful termination including downsizing and mass layoffs
  • Breach of employment contract
  • Violation of federal, state, or local civil rights laws
  • Failure to promote
  • Mental anguish
  • Whistleblower retaliation

That is just a short list of coverages provided by EPLI.  EPLI doesn’t provide a “Get Out Of Jail Free Card” for any HR related incidents like the list above, but it can protect the business from taking the brunt of a lawsuit.

The Consequences Of Not Having EPLI

The claims listed above resulted in the following payouts:

  1. The age discrimination case may have been unfounded, the employer settled for $10,000 to make the claim go away.  Additionally, legal fees were in excess of $10,000.
  2. After the Equal Employment Opportunity Commission got involved in the sexual harassment case, the business owner decided to settle to the tune of $40,000 to avoid further legal action.  His legal fees also exceeded $10,000.
  3. The race discrimination case was settled for $75,000 and the business owner was required to establish policies and procedures for minority hiring.

Keep in mind that these are relatively small claims.  The EEOC website gives information on recent claims, including a $499,000 jury award in a sexual harassment and retaliation case, and a $1.2 million settlement in a racial harassment and retaliation suit.

Don’t let claims like these bury your business – especially when there are very affordable, practical policies that can cover your risk.  Contact your Hayes Broker today to get a risk management consultation, and to find out how EPLI can better protect your specific business.



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