Employment Practice Liability Insurance (EPLI)

Companies of all types and sizes face employment-related liabilities. In increasing numbers, current former and potential employees are filing claims against employers alleging sexual harassment, age and gender discrimination and wrongful termination. Indeed, more than 30% of civil litigation cases heard today involve employment-related liabilities. Disturbingly, this percentage has been on an increase in recent years.

Large organizations with multi-layers of management and large number of employees have the greatest chance of facing an employment practice liability claim. But no company is immune. For example, small businesses lacking an experienced and well staffed human resource department are also at high risk. Other warning signs include:

• A high growth rate.

• A high turnover rate.

• A lack of written employment guidelines and human resource manuals.

• A lack of supervisory training programs.

• An inexperienced management staff.

• A history of employment problems.

• Poor performing employee benefit programs.

Reducing Your Risk

There are a number of prudent steps a company can take to reduce its employment practice liabilities. All such remedies center on installing a comprehensive human resource management program and then training managers and employees in proper workplace conduct.

Protective measures begin in the hiring process. Ensure that all managers with the responsibility for interviewing and hiring recruits are well aware of state and federal laws regarding employment discrimination and sexual harassment. Institute consistent hiring guidelines and ensure they are consistently applied. Provide training for hiring managers and regularly provide feedback on their performance.

Once a recruit is hired and becomes an employee, managers need guidelines and training on how to manage their subordinates. Institute sound policies regarding performance and salary appraisals as well as disciplinary procedures. A zero-tolerance sexual harassment policy is a must. Policies regarding management-employee personal relationships are often advised. Sensitivity training is needed regarding age and gender discrimination.

Should an employee file a complaint against a member of management, swift, prompt and documented action is required. Employment practice issues that are ignored or treated in ways that may be considered retaliatory often lead to large and expensive lawsuits and settlements.

Valuable Insurance Protection

Employment Practice Liability Insurance is an important safeguard that can cover the sometimes exorbitant costs of an employment-related claim or lawsuit. EPLI covers both the cost of any judgment or settlement, plus defense costs, up to policy limits and subject to the policy deductible.

Generally, EPLI covers legal actions from prospective, current and former employees for age or gender discrimination, sexual harassment, wrongful termination, wrongful discipline, wrongful failure to hire or promote, mismanagement of benefits, emotional distress and similar employment-related claims. Policies are typically written on a claims made and reported basis, meaning that an incident against the employer must occur and be reported to the insurance company currently providing coverage in order for it to be covered.

The premiums charged for EPLI will depend on a number of factors including the amount of coverage, the size of the company, the number of employees, the turnover ratio, human resource policies and the company’s claims history. Companies with clean claims histories and good human resource practices can typically find adequate coverage at an affordable price.