Employment Practices Liability Insurance (EPLI) is a type of insurance coverage that is designed to protect a business from financial loss caused by employment-related lawsuits. There are a variety of lawsuits that can be covered, starting with protection for the directors and officers of a company, the human resources department and even a principal of an agency that is involved with the hiring and discharge of employees. There are many companies that offer coverage to protect employees that might be involved with a legal action brought by a third party, such as a disgruntled customer.
The median award of an EPLI claim in 2011 was $325,000, up from $172,500 in 2010. The award median by type of discrimination was: age, $247,800; disability, $292,000; race, $215,652; and sex, $150,000.
At its inception, EPLI was offered as a way to protect a business from a lawsuit as a result of racial discrimination, age discrimination, sexual harassment, wrongful termination or failure to be in compliance with the Americans with Disabilities Act. However, since coverage began to appear in the early 1990s, the definition of who and what is covered has been expanded. For example, policies can now cover claims involving inappropriate workplace conduct, invasion of privacy, defamation of character, deprivation of a career opportunity and negligence in personnel evaluations.
With the average cost of nearly $10,000 to defend an allegation, even if it turns out to be groundless, one can easily see that small businesses can suffer “significant financial loss” as a result of an EPLI claim. Here are some revealing statistics:
- According to the 2012-2013 Edition of Jury Award Trends and Statistics, now published by Westlaw, the median award of an EPLI claim in 2011 was $325,000, up from $172,500 in 2010. The award median by type of discrimination was: age, $247,800; disability, $292,000; race, $215,652; and sex, $150,000.
- The probability of the plaintiff winning a case at trial hovers at 51 percent. Broken down by type of alleged discrimination, the figures are: age, 40 percent; disability, 44 percent; race, 50 percent; and sex, 64 percent.
- Statistically, a company with 100 employees can expect to get hit with an EPLI claim once every three years.
The insured should take time and review EPLI policies carefully before reaching a decision to purchase coverage. It is important to review the definition of who is insured as well as the kinds of actions that are being covered. Any serious review of an insurance offer is not complete until you review the exclusions outlined in the policy.
Many insurance companies have now recognized that it is nearly impossible to completely remove the threat of an EPLI claim and have begun to implement loss prevention services as part of their offer of insurance. These programs can be invaluable for a firm as a supplement to their human resources department and can help establish proper procedures that will help alleviate the circumstances that will give rise to an EPLI claim.
All businesses, large and small, recognize the importance of retaining and developing a strong and productive group of employees. With the rapid changing of technology and the increased responsibility to do all things properly in the workplace, business owners are faced with an ever increasing array of challenges. Placing the proper amount of emphasis on issues relating to the employees is a prudent course of action for the owner of any business.
Treating your employees as one of your most important assets would be a good foundation for considering EPLI for your business insurance and if we can offer any assistance to your business contact us.