Cyber Insurance Blog

Why Your Clients Need EPL Insurance (More Than You Think!)

Why Your Clients Need EPL Insurance (More Than You Think!)

The rise of social media has brought new challenges in terms of public relations. Now, a simple hashtag like #metoo can quickly spread stories about inappropriate behavior in the workplace, whether that be discrimination, harassment, or sexual assault.

Your clients must be prepared to promptly address unacceptable actions in the workplace as soon as they are brought to light. Employment practices liability insurance, also known as EPL insurance, is designed to mitigate exposure to lawsuits related to the treatment of employees.

The Equal Employment Opportunity Commission (EEOC) is an independent federal agency that promotes equal opportunity in employment through enforcement of civil rights laws. In 2018, the Commission secured $505 million for 67,860 victims of discrimination in the workplace.

The obvious takeaway from this statistic is that the EEOC is quite prepared to investigate employers for allegations of discrimination. That’s why having EPL policy coverage is so important for businesses of all sizes.

What is EPL Coverage?

Male lawyer clasps hands on table while consulting with a client.

EPL insurance covers businesses when employees make claims regarding the violation of their civil rights.

Large corporations typically have substantial EPL coverage in place and are prepared to deal with just about any type of employment lawsuit. However, small and medium-sized businesses (SMBs) are often most vulnerable to such claims. They may lack a legal department or employee handbook detailing the policies and procedures around hiring, disciplining, and terminating employees. They’re also less likely to have a current EPL policy in place.

Common types of discrimination leading to employee lawsuits include the following:

  • Age
  • National origin
  • Religion
  • Gender
  • Pregnancy

Some policies also include Third-Party coverage which would cover a business for claims from a third part (customers, clients, vendors) related to discrimination, harrassment, failure to hire, etc.

Who Needs EPL Coverage?

Diverse group of businesspeople at long wooden table with two shaking hands.
In our litigious environment, there are many instances that call for employment practices liability insurance coverage.

Employment-related liability starts the moment an applicant walks in the door or visits the “Career” page on your website. There are many interview questions that are inappropriate and could be used to justify a lawsuit if the candidate isn’t hired. For example, questions related to age, sex, religion, national origin, or disability would be inappropriate because it is illegal to base a hiring decision on these categories. Some states also prohibit questions about arrests or convictions, while other states allow this.

During employment, the behavior of supervisors can cause problems. For example, if someone makes an inappropriate comment within the hearing of a worker, the company is usually liable. Most EPL insurance policies will cover such incidents.

Even if former employees sign a waiver or accept a severance package, by law they are not required to waive discrimination complaints.

Do your clients’ businesses perform any of the following actions?

  • Hire or fire employees
  • Offer raises to employees
  • Communicate to or about employees
  • Manage benefits for employees
  • Demote or promote employees

If so, they’ll need EPL policy coverage.

What Does EPL Cover?

Female hand signing a paper with coffee cups, a laptop, and a cell phone on the table.
Employee lawsuits are on the rise, and the costs can be staggering even for employers who are in the right. Most policies will only provide insurance benefits if the policyholder was covered both at the time when the discrimination incident occurred and the time when the claim was filed.

Employer’s liability insurance covers employers against claims of alleged discrimination, wrongful termination, harassment, and other employment-related matters. It also protects employers if a worker has a job-related injury not covered by workers’ compensation. Sometimes, liability insurance can be packaged with workers’ compensation as an added protection.

Employer’s liability insurance doesn’t cover every situation. Exclusions include:

  • Criminal acts
  • Fraud
  • Illegal profit
  • Claims associated with downsizing, layoffs, and restructurings

Which Insurance Carriers Have the Best EPL Coverage?

If you’re a broker or insurance agent trying to figure out the best selling options for your clients, we invite you to learn more by scheduling a call with one of our insurance experts. We’ll explain the carriers we work with and help you determine which policy types would be right for your clients’ needs. Our goal is to save you the time and effort it would normally take to research these topics on your own––so that you can give your clients exactly the information they need.

Schedule a call with one of our insurance experts to get answers to all your questions!

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