What Is EPLI And Does My Business Need It?

Jul 24, 2020 | Business Insurance

As a business owner, your goal is to grow and be known for your own branding. However, as you strive to reach your goals, certain problems arise and you can’t handle them alone. One of these problems is employment liability and complaints that come up that need sudden attention and surprisingly give you headaches in the long run.

Small businesses, particularly, are very vulnerable to these cases of employment liability claims which can cost you a fortune. There’s a risk in employing people but it’s a necessity to run your business. It’s a must to consider the need to purchase Employment Practices Liability Insurance to protect you from financial loss and damage to your company brand that employment claims may bring.

What is EPLI?

EPLI or Employment Practices Liability Insurance is an insurance that protects your business from wrongful acts coming up from the process of employing people. Simply put, EPLI works when one of your employees complains that they had been violated at your hands or by another co-employee. It can cover your legal costs and settlements caused by events from the past and in the present.  Also, aside from the fact that you can purchase it alone, EPLI can be bundled with a business owner’s policy. 

What does it cover?

Research statistics show that out of five employers in the US, three of them will be sued by a prospective, current, or former employee. While most lawsuits don’t have any grounds, a lot of the time and money is wasted on them. This is where EPLI comes into play. It provides protection from the following wrongful employment practices:

  • Sexual harassment. This wrongful act involves violating a person through unwanted sexual advances. Common types such as quid pro quo and hostile working environment are some of the claims of sexual harassment.
  • Discrimination. Wrong or unfavorable treatment of employees such as failure to promote because of the management based promotions on sex, race, disability, and age.
  • Actual or alleged wrongful dismissal, discharge or termination. It’s an early dismissal or wrongful termination of an employee’s contract that breaks the rule of employment.
  • Employment-related libel, slander, humiliation, and defamation. This happens when the employee is being humiliated by a written or spoken false statement intending to harm his or her reputation.
  • Invasion of privacy. This pertains to the employer that unreasonably conducts searches and surveying on employee’s private space such as a dressing room or bathroom.
  • Employment-related misrepresentation. It happens when employers make promises and representations to employees such as possible promotions. The employee then will anticipate but later realized that the promise is untrue. This will cause the employee to sue the company.
  • Wrongful failure to employ or promote. It happens when a worker has been disregarded for promotion in violation of state or federal law. Also, an employee that protects his character will be eligible for damages if he would be discriminated resulting from a wrongful failure to employ. 
  • Wrongful demotion, incorrect evaluation or wrongful deprivation of career opportunity. An alleged claim of failure to conduct a series of training for self-advancement or progress of an employee’s career.
  • Wrongful discipline. It’s an alleged claim when an employee was disciplined due to a violation that didn’t happen or it really happened but the discipline executed is excessive.
  • Vicarious liability for intentional acts.  An employee who committed negligent acts towards other people that might cause injury is a vicarious liability of the employer, provided that the acts happened within the employment period.
  • Punitive damages. It refers to settlements given to the complainant for the damage or injury a defendant had caused to him. 
  • Coercion. It is an act where one forces the other person to do something out of his will. An example is when an employee’s rights got violated when the employer threatened to fire the employee if he doesn’t follow what the employer wants him to do.

Does my business need EPLI?

YES. EPLI is a great tool to secure your business from unexpected lawsuits you’ll never know when to come. Consider these reasons to help you decide why you need to purchase this type of insurance.

  1. General liability coverage or business liability insurance excludes lawsuits and discrimination allegations made by your prospective, past and existing employees. Without EPLI to cover you, you are risking your business in a big problem.
  2. Good employment practices don’t guarantee your safety from lawsuits and claim your employee might file against you. To win a legal case you’ll be needing a big sum of money that amounts to more than $500,000 causing you a lot to lose.
  3. Litigations are very rampant in our society so every business no matter how big or small are susceptible to legal actions from your employees, be it from the past or present. It is very easy for them to file a case at no cost. A small business might come to a financial downfall due to defending expenditures in court.
  4. If the case goes to legal actions, the defense and court fees are of high amount. The time, money, and effort might cause your business to a big loss. Statistics show hundreds and hundreds of dollars are about to be awarded if the lawsuit wins against the defendant.

How much does it cost?

Employment Practices Liability Insurance cost is worth the price with regard to the benefits you can avail in an event of a lawsuit or claim. There are some factors that EPLI considers on estimating costs such as:

  • Number of employees
  • Type of industry or business
  • Claims history
  • Company protocols on employee’s behavior and training
  • Company financial capacity
  • Length of service
  • Hiring/firing procedures

EPLI commonly costs between $800-$5,000 annually. Small businesses can look for insurance coverage as low as $1,200 per annum.  You can also purchase EPLI coverage at $300 per year if you will bundle it to your business owner’s policy. At present, EPLI has been lowering its price since more insurance companies are rising and promoting reduced prices to compete with other companies. 

Growing your business and employing people has never been easy because of all the things you need to fix and consider beginning from employment up to proper management. Educating your employees and implementing the procedures are needed to avoid an improper practice that will cause complaints and claims. 

Employment Practices Liability Insurance not just covers you but the overall performance of your company. One lawsuit may jeopardize the name of your business just because of a false accusation. Groundless claims are truly damaging that can take away your hard-earned business and branding. Acquiring insurance that will back you up once a claim comes out and fires you with a lawsuit is a good investment you will appreciate with your life.

Contact us today and we’ll help assist you in finding insurance that best suits your needs. 

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