Employment Practices Liability - Why You Need It

Posted by Julie Danna on May 25, 2018 9:03:00 AM

Claims for employment practice violations such as unlawful discrimination or wrongful termination have become a fact of life in doing business for all companies, regardless of size.  Individuals recognize that their risks continue to grow, given social media, planned reductions in workforce and/or plans to increase a practice.

Employment practices liability (EPL) insurance is an excellent solution to secure balance sheet protection for the significant defense and potentially large settlement costs from wrongful employment allegations.

It seems every time you turn on the news you see that the number of charges filed by employees with the Equal Employment Opportunity Commission (EEOC) is near an all-time high, and lawsuits brought by employees represent one of the most common types of litigation faced by employers of all sizes.  

EPL coverage responds to claims made for many employment actions against employers and employees including but not limited to:

  • Discrimination including but not limited to race, color, religion, creed, sexual orientation, pregnancy, military status, age, disability, sexual preference
  • Harassment- including sexual harassment, workplace bullying and other forms of workplace harassment
  • Wrongful Termination
  • Retaliation
  • Failure to Employ or Promote
  • Wrongful Demotion and Negligent Evaluation and Other Workplace Torts

Many companies fail to recognize the burden to a company in defending claims that are baseless and unfounded.  As reported by Barbara Bowers in Best’s Review, statistics show that while approximately 75% of all EPL claims are found to be groundless, defending such claims can be drawn out and very expensive. In addition, 81% of such claims are settled for between $22k - $40k on average, and defense costs can average between $80k - $120k.    The costs for a small or midsized private company can be devastating, particularly given the 60% of employment claims are brought against private companies with 15-200 employees.

Many EPL policies also provide protections for the unlawful discrimination by employees of the policyholder against third parties, such as vendors, customers, or service providers.  This can be an important feature of coverage for policyholders who have significant interaction with the public.

In the event of a claim, an Insured needs to hit the ground running.  Many employment practices liability policies are “duty to defend” contracts, which means that the Insurer is responsible for assigning legal counsel and monitoring the defense. This is a critical fact, as any Insured needs to move quickly and effectively in the event of an employment claim.  Businesses are spared the worry of selecting qualified legal counsel and will be assigned expert, seasoned counsel skilled in employment law at pre-negotiated rates.

For employers, second only to preventing bad behavior from occurring in the first place is staying out of the headlines and avoiding liability claims. Protecting businesses with the proper insurance coverage and effective risk management programs is the mission of our agency. Always remember that it is important to consult with an experienced agent to better understand the nuances of the current marketplace and obtain the best available coverage.

For further information on EPLI coverage, contact Julie Danna at or simply call me at 888-720-0144.

Topics: Insider

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