Does My Business Need Employment Practices Liability Insurance?

In today's increasingly complex employment arena, even small businesses with just a few employees need to consider the possibility of a claim related to employment practices.

A business owner thinks about adding employment practices liability insurance.

The U.S. Equal Employment Opportunity Commission, the federal agency that monitors employment discrimination, received almost 100,000 private sector discrimination complaints in fiscal year 2012. The bulk of the complaints were split almost evenly among retaliation allegations, race discrimination and sexual harassment complaints.

The average cost to settle an employment practices liability claim can be steep. In 2012, employers paid out a record $467 million for wage and hour settlements, according to National Economic Research Associates Inc. And, according to Bloomberg Law Report, the average compensatory award in federal employment cases in 2009 was greater than $490,000, excluding attorney fees and punitive damages. The cost to your reputation can be equally destructive as well.

As a business owner, of course, it's important that you make sure to follow all the legal guidelines surrounding employment practices. But, buying a business insurance policy with employment practices liability (EPL) coverage is also a smart way to protect yourself financially in case of unforeseen circumstances. This type of business insurance coverage can help to protect you and provide a defense in the event an employee or contractor sues you.

Here are some types of scenarios that may be covered (although you should check with your insurer about your specific policy's coverage):

  • Demotions or failure to promote
  • Discrimination, including verbal or emotional abuse
  • Negligent hiring and supervision of employees
  • Retaliatory actions against existing employees
  • Sexual and other forms of harassment, including religious persecution and transgender discrimination
  • Violations of the Americans with Disabilities Act Amendments Act of 2008 (ADAAA)
  • Wage and hour claims
  • Wrongful terminations

Employment practices liability coverage typically protects you in case of claims made by full-time or part-time employees, temporary employees, leased employees or independent contractors. Coverage is also available for claims initiated by customers and vendors, which according to

Thinking about purchasing employment practices liability coverage? Talk to your Allstate agent to better understand what coverages might make you feel more secure in your business.

Related Resources:

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2013 Allstate Insurance Company, Northbrook, IL.

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