What is employment practices liability insurance?
Last updated: December 2021
Employment practices liability insurance (EPLI) is a type of business insurance coverage that may help pay for legal costs if your business is sued by an employee or contractor. EPLI may help protect your business against the following types of lawsuits::
- Discrimination
- Sexual harassment
- Retaliation/adverse actions
- Wrongful termination
- Deprivation of a career opportunity
- Violations of the Family and Medical Leave Act (FMLA)
EPLI is typically sold as an optional coverage that you can add on to your existing business owners policy, but it's important to check with your insurer to understand what options are available for your business.
Who is covered under EPLI?
EPLI typically covers claims brought against you or your business's management personnel (and sometimes other employees).
Lawsuits against your business filed by the following groups may be covered:
- Employees
- Former employees
- Employment candidates
- Temporary/seasonal employees
- Leased employees
- Independent contractors
- Vendors
What isn't covered under EPLI?
Employment practices liability insurance does not protect you or your business against intentional or dishonest acts. Additionally, employee claims involving bodily injury or property damage typically aren't covered. Those types of claims would usually fall under your business's general liability coverage or worker's compensation coverage.
How much does EPLI cost?
The cost of employment practices liability insurance depends on a few factors, according to the Insurance Information Institute:
- The type of business you have
- Number of employees at your business
- Whether your company has a history of prior lawsuits
- The limits that you choose
Additional factors may affect the price your business pays for EPLI. Since the cost can vary by situation, it's important to talk with your insurance agent to understand the price you pay.
Protecting your business with EPLI
Sometimes, lawsuits regarding your business's employment practices aren't always filed right away. That's why it's a good idea to have continuous employment practices liability coverage, as this means claims may also be filed well after an incident occurs. Having continuous coverage helps prevent gaps in your business's coverage -- which may include extended reporting period coverage. This coverage allows a claim to be filed for up to a year after a policy expires.
EPLI requirements and limits can vary by state, so be sure to consult with a local agent to understand the coverage available to your business.
Help prevent employee lawsuits
As a business owner, it's important that you make sure to follow all the legal guidelines surrounding employment practices. The U.S. Equal Employment Opportunity Commission offers tips, FAQs and resources for small business owners at its small business resource center to help you understand your responsibilities when it comes to employment discrimination laws.
Purchasing employment practices liability insurance is a smart way to help financially protect your business if the unexpected happens. Talk to your insurance provider to better understand the coverage options available to your business and to learn more about EPLI.