Employment Practices Liability Insurance: Drawing a Line

The United States of America, has always stood for equal opportunities in employment, and creating a safe workplace for the community of employees. Similar to several other areas of labor and employment related issues, the United States of America, has been a shining example of how legislation can be used to enforce good practices and prevent acrimonious incidents at the workplace. Some of the landmark legislations in this domain include:

• 1964: Title VII of the Civil Rights Act
• 1967: ADEA (Age Discrimination in Employment Act)
• 1990: ADA (Americans with Disabilities Act)
• 1991: Civil Rights Act
• 1993: Family and Medical Leave Act (FMLA) 

These laws are interpreted and enforced by the EEOC (Equal Employment Opportunity Commission) of the Federal Government.

However, use and abuse of laws exist in every sphere of life and the law governing the safety and equal opportunities for employees is no exception. These laws have, unfortunately, opened up a whole slew of employment related lawsuits. It has been reported that between 1999 and 2003, there were as many as 403,000 law suits filed under various laws and subsections, by employees, with the EEOC. Needless to say, some of these claims were groundless, but nevertheless extremely expensive to defend or settle.

That is why, in the last couple of decades, one of the insurance products that is increasingly being favored, is the Employment Practices Liability Insurance (EPLI). EPLI is a type of liability insurance that covers wrongful acts arising at the workplace and provides protection from claims against them. These generally cover:

• Sexual harassment at the workplace
• Discrimination on various grounds such as gender, age, physical disability, compensation & benefits, genetic traits, nationality of origin, pregnancy, race, color, religion and retaliation for whistle-blowing, among others
• Wrongful termination from employment
• Breach of employment contract
• Negligent or improper evaluation
• Refusal to employ and/or failure to promote
• Wrongful norms for workplace discipline
• Wrongful infliction of emotional distress
• Inappropriate workplace conduct
• Defamation
• Invasion of privacy

EPLI aims to protect Managements of the businesses from groundless claims brought about by disgruntled employees. The coverage also includes:

1. Perceived issues: Although there may not be an intention to create a wrongful act, gaps in age, generation and communication gaps can create a perception of wrong-doing.
2. Legal conflicts between employees and contractors, vendors, customers, partners and clients.
3. Deliberate damage or injuries inflicted by the company’s employees without the Management’s consent or knowledge.

The policies cover Directors, Officers, Management personnel, and employees as insured. However, most EPLI policies generally exclude coverage for:

• Punitive Damages
• Fair Labor Standards Act Violations
• Certain Americans With Disabilities Act Claims
• Employee Retirement Income Security Act (ERISA) Violations
• Consolidated Omnibus Budget Reconciliation Act (COBRA) Violations
• Occupational Safety and Health Act (OSHA) Violations
• Intentional Institutional Claims (such as retaliating against a whistle-blower)
• State Employment Law Violations

The cost of EPLI coverage is a complex matter and depends on the nature of business, size of the company (number of employees), past history of lawsuits and claims made against the company. The policy will reimburse the insured company against the defense costs which is the cost of defending the lawsuit in court, as well as, the settlement amount. It also covers legal costs, irrespective of the outcome. 

Allied Brokers is a full-service insurance brokerage firm and has been providing insurance cover throughout California, under various categories since 1954. We understand EPLI thoroughly, having handled many such claims. We will guide you through the intricate terms, conditions, details and caveats that govern EPLI. We provide policies that are optimally-priced and offer the kind of coverage that is required, keeping your best business interests in mind.