Today's businesses mostly operate in a dynamic environment and are subject to cut-throat competition. On top of this, the liability environment is also highly unpredictable. Employment Practices Liability Insurance (EPLI) claims pose a risk to businesses of all sizes. No wonder why we receive a lot of queries regarding EPLI. Therefore, in this article, we are going to discuss Employment Practices Liability Insurance (EPLI) in detail. After going through it, you will have a clear idea about what EPLI is, why you need one and what it covers and excludes.
Let’s start with the very basics then!
What is Employment Practices Liability Insurance?
Employment practices liability insurance or EPLI is designed to reduce exposure to employment-related lawsuits. It protects businesses from claims filed by employees against employers for violations of their legal rights. It covers companies for legal expenses incurred when employees allege discrimination based on sex, race, age, wrongful termination, harassment, or refusal to promote.
What does EPLI cover?
EPLI, in general, will cover the costs of defending your organisation against settlements, lawsuits, and judgements resulting from poor employment practices. Legal expenses will be covered regardless of whether the lawsuit is won or lost, as long as the act performed was not illegal.
Policies for employment practises liability insurance covers a broad range of employee workplace claims, including, but not limited to-
Discrimination at work can take various forms, including discrimination based on race, religion, gender, disability, age, pregnancy, equal pay, genetic information and other factors.
While employees can make a variety of harassment claims against your organisation, the most common sort of workplace harassment is sexual harassment. Sexual harassment is defined as unwanted sexual approaches, both physical and verbal. it may also take into account management or other coworkers asking for sexual favours or services in return for promotions. Workplace harassment accusations have gradually increased in recent years.
3. Wrongful termination
Employees who file a wrongful termination lawsuit claim they were fired illegally and for reasons unrelated to their performance. When terminating employees, companies must ensure that there has been a breach of the employment contract. Employees seldom win wrongful termination claims, but they may be lengthy and costly regardless of the outcome.
4. Negligent evaluation
A negligent evaluation claim arises when an employee believes that his performance was unfairly appraised and that the unfavourable evaluation does not accurately reflect his actual performance.
5. Failure to promote
While there are several different kinds of claims involving a failure to promote, recent trends reveal that many such claims are related to disability discrimination. Employees frequently assume they are being passed over for promotions due to disabilities such as hearing, blindness, or a medical condition like diabetes. Claims for failure to recruit are similar and fairly common.
In a retaliation claim, the employee alleges that they are being mistreated or punished as a result of speaking up about workplace concerns that affect others. Pay cutbacks or demotions that have no connection with the employee's overall performance are frequently the subjects of retaliation claims. Employees frequently claim retaliation after uncovering or bringing to light a workplace problem that the employer did not want to become public.
7. Invasion of privacy
Employees who file an invasion of privacy claim believe that their rights are being violated by various monitoring instruments in the office. such instruments may include computer systems that monitor employee behaviours and security cameras placed throughout the premises. These kinds of allegations are becoming increasingly widespread.
In such claims, employers are accused of making false remarks that may harm an employee's reputation at work.
9. Mismanagement of employee benefit plans
Employees may also sue if errors in the management of benefits such as healthcare and retirement programmes occur. It's also a good idea to have a fiduciary liability policy in place for such claims since it covers any of your workers in charge of benefits who may have made a mistake that resulted in the claim.
10. Wrongful infliction of emotional distress
Intentional infliction of emotional distress happens when an employer deliberately causes emotional distress to employees through inappropriate workplace behaviour. Again, these types of allegations are inextricably linked to claims of discrimination, harassment, and other forms of inappropriate workplace behaviour.
What does EPLI not cover?
Here are some types of claims that do not fall under the purview of employment practices liability insurance:
- Bodily injury claims
- Property damage
- Liabilities related to intentional or dishonest acts
- Third party slander and libel lawsuits
- Claims red to workers’ compensation
- Unpaid wages
- Professional negligence
- Employee injuries and employee lawsuits over injuries
Why do small businesses need EPLI?
Both large and small businesses, across industries, face employment practices claims. Even before going to court, these accusations can reduce employee morale, ruin reputations, and cost businesses financially. Small businesses require this coverage because any claim could financially ruin the company. When a potentially damaging lawsuit comes in the way, a small or medium business may not quite have the financial ‘muscle power’ enjoyed by the larger companies to deal with it. Please keep in mind that being a small or medium business does not make one immune to potential lawsuits.
Even small businesses with a few employees may face internal and external employment practices claims. External claims are occurrences in which a third party, customer, or client makes a complaint for discrimination, harassment, or other situations that match the EPLI policy's definition of a wrongful act. Employment practices liability insurance safeguards your business against a wide range of employment-related lawsuits. There are numerous reasons why the number of harassment claims appears to be increasing all the time. One reason may be attributed to the widespread advancement of social media into all walks of life. Social media seems to have given people who are harassed at work, a platform and voice to speak up.
To summarise, employee lawsuits are on the rise for a variety of reasons. Even if you are in the right, defence costs might be exorbitant. That is why, no matter what, you must safeguard your small business with employment practices liability insurance.
What does EPLI cost?
The cost of your EPL insurance, like any other business insurance, is determined by a variety of factors, including the following:
- Amount of deductible
Most EPLI coverages come with a deductible. The deductible amount is determined by how much the company must pay for indemnities and claims before the policy starts. Lower premiums mean a bigger deductible and vice versa. Insurers often demand higher deductibles as limits increase. However, insurers will set deductibles according to what they estimate the insured can afford. This estimation is again typically based on revenue figures from the previous year.
- The size of your company
It is obvious that your premium will increase when your business adds new employees. But, it is not usually an exponential increase. At times, insurers may offer discounts when a business grows, in order to retain them.
- HR procedures
Insurers will not only consider the company's size. They will also examine the effectiveness of your HR policies in preventing claims and mitigating risks. In actuality, many insurance underwriters are scrutinising your company's investment in human resources talent, policy, and processes. Organizations that have not demonstrated this commitment runs a higher risk and will be charged more than their counterparts, or worse, will be denied coverage entirely. EPLI pricing is more than just a tiered staff count method. Rather, it is an exercise to measure the robustness of HR and its procedures.
- Claims history
Naturally, your claims history will have an impact on your premiums. Your premium will be cheaper if you have not had any claims in the last three years.
- Policy terms
Companies that want to save money on EPLI will need to address potential employment practices liability risk factors. Empowering your HR staff to appropriately deal with possible concerns is a critical step in preventing EPLI claims. It is also critical to emphasise internal rules and procedures for both employee hiring and termination. You can expect fewer lawsuits from disgruntled employees and rejected candidates if you have a consistent and fair recruitment procedure. Furthermore, engaging your employees in proper harassment prevention training can go a long way towards making your workplace a more pleasant and less risky environment for everyone.
We hope the discussion above will help you understand what Employment Practices Liability Insurance is, why you need one and what it covers and excludes. We have also discussed other important matters related to Employment Practices Liability Insurance. For the best recommendation on EPLI, you may contact BimaKavach. Here, you can get the best recommendation for any insurance product in just 5 minutes.
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