What is EPLI Coverage?
Employment Practices Liability Insurance is available to protect businesses for both first-party (employment related) and third-party (customer and vendor) lawsuits involving such issues as harassment or discrimination. Third-party liability coverage is generally available by endorsement for additional premium and should be seriously considered by businesses that interact with the public.
Why is it important?
The sole purpose of insurance is to provide you with a form of protection against a possible risk. No company, large or small, is immune to lawsuits. Lawsuits can mean costly legal and attorney fees that can really hit your company’s bottom line. According to SHRM, the average cost for defending and settling employment law cases is $160,000.
Examples of first-party lawsuits include:
- Discrimination: This can refer to decisions to hire, fire, or promote on the basis of race, color, religion, creed, age, sex, national origin, disability, appearance, sexual orientation/preference, or pregnancy as it relates to the workplace.
- Harassment: This can be both sexual and non-sexual. Sexual harassment is the more common work-related offense.
- Wrongful Termination: This is normally defined as the “actual or constructive termination of the employment relationship in a manner that is wrongful and against the law or that breaches an implied agreement to continue employment.”
- “All Other” Workplace Torts: EPLI also includes forms that can provide coverage for various claims alleging actions other than discrimination, harassment, or wrongful termination. Some examples of this could be wrongful discipline, wrongful demotion, failure to grant tenure, etc.
Third-party employment practices liability coverage is needed because coverage for claims by nonemployees is not provided under commercial general liability (CGL) policies or a standard first-party EPLI policy. This is because CGL policies exclude coverage for harassment and discrimination—the two causes of action most likely to be alleged in claims by third parties.
The Scary Truth: Real Examples of Third-Party EPLI Claims
A customer visits a place of business who is handicapped and wheelchair bound. The place of business had steps to enter the place of business with no option for a ramp, which is against ADA compliance. A suit is then filed after the plaintiff visits the place of business.
A coffee shop was sued in federal court by a group of deaf customers who said they were mocked and mistreated. The group claimed being harassed multiple times because of their disability.
A customer sued a gas station in New Jersey after being sexually assaulted by an attendant who was filling up her car. The woman claimed the station attendant made inappropriate advances and another employee witnessed this and did nothing to intervene.
What can you do as an employer?
As a business owner, you have to shoulder some of the responsibility and not rely solely on your EPLI coverage. Make sure to do your due diligence by having employee orientation, periodic trainings about harassment and discrimination, and have a written policy in place that is practiced. This could even result in a lower third-party employment practices liability quote depending on the insurance carrier.
Talk to your insurance adviser to make sure that your business is protected against first-party and third-party EPLI claims. Our team at HAWK Advisers is always willing to discuss your commercial insurance needs!