EPLI – Every Business Should Carry This Coverage
What is Employment Practices Liability (EPLI) Insurance?
Employment Practices Liability Insurance (EPLI) will protect a business against claims that allege actions from first and third-parties of wrongful termination, discrimination, sexual harassment, wage and hour violations (FLSA), failure to promote, retaliation and much more. EPLI will often pay defense costs for various employment related claims.
Why does your client need EPLI?
Not all EPL policies and endorsements are created equal. Many small businesses feel they do not need coverage for EPL, however that is simply not true. Almost half of all EPL related claims come from businesses that have less than 100 employees. Over 60% of all employers will be sued by former employees. No business, regardless of size, is immune to a potential claim. In 2019, the EEOC recorded 72,675 charges and obtained more than $39.1 million in settlements.
Wage & Hour Lawsuits:
Wage and Hour violations are one of the most common EPL claims triggers. This coverage provides protection for defense costs against alleged violations of a business failing to pay overtime to a nonexempt employee. Wage & Hour coverage is also often sub limited and is subject to a higher retention.
Some casualty carriers may offer a small EPL sublimit as an optional endorsement onto a General Liability Policy, however that may not be enough coverage. Many of these forms do not include Wage & Hour coverage or other common claim triggers.
EPL claim frequency has increased by over four times since 2000.
Recent claims examples:
- A partner in a large law firm in the Northwest took maternity leave. Upon returning from her leave, she learned the firm had promoted another individual to her partner role and her services at the firm were no longer needed. She sued the firm for wrongful termination.
- A male manager of a small restaurant in Texas sent explicit text messages to a female employee and promised her a promotion if she went out with him. When she refused, the manager cut back her hours significantly. This resulted in a sexual harassment and retaliation claim against the restaurant.
- A gym in Southern California required all their employees to clock out at 10pm when gym hours ended. Many employees were required to stay unpaid after closing to clean up the gym and organize the equipment. This resulted in a substantial wage and hour lawsuit against the organization.
- A front desk employee at a large Michigan medical office quit and sued her employer for a hostile work environment. She had reported bullying to her supervisor on four different occasions and the supervisor ignored her allegations.
Even the best and most well-run businesses are susceptible to an EPL claim. It is imperative that agents at a minimum have a discussion with all their risks about the potential impact of an EPL claim on their organization.
About the Author
Kevin Merchant focuses his efforts at Founders Professional on assisting his retail agency partners find solutions for their hard-to-place professional liability, management liability (like EPLI) and cyber liability risks. Kevin is based out of Tampa, FL and can be reached directly at [email protected].