All employers need liability insurance, regardless of their specific industry.
While most know this, many are unaware that there are different kinds of liability insurance to make sure employers are covered in a wide variety of situations. For example,
Employment Practices Liability Insurance (EPLI) has become a growing necessity as lawsuits over things like unfair hiring practices, wrongful termination, unfair HR policies, etc. have become more commonplace. Here’s what you need to know about this often misunderstood but highly necessary form of insurance:
Where Claims Come From
Most legal claims over employment practices come from current or former employees (although sometimes they can come from job applicants who were never hired). These are the claims you may be at risk for:
- Wrongful termination
- Unlawful hiring
- Sexual harassment
- Discrimination
- Breach of contract
- Emotional distress
- Violations of wage and hour laws
- Invasion of privacy
Now, it is important to realize that these are the more common reasons for lawsuits, but there are other employment practices reasons you may have a claim filed against you. You can lower your risk by having a great HR team and keeping up with regular anti-harassment and proper work ethics training, but this still unfortunately does not guarantee you will not end up facing a claim.
Why Liability Insurance is So Important
Liability insurance is the best form of protection because it helps ensure you will not go bankrupt in the event of a claim. Instead of you having to use company funds or personal ones to pay for your legal costs, your policy will pay out for you. Your coverage amount will depend on factors like the size of your company, the amount of employees you have, etc., but it will usually be a high enough amount to make sure that a liability claim will not be financially devastating.
Employment practices claims are a type of commercial liability exposure, and they sit alongside other coverages employers may hold such as commercial auto exposure and property coverage. Underwriting factors and exclusions vary by insurer, so it’s important to understand limits, retention (deductibles), and common exclusions like intentional acts or certain statutory penalties. A short example: a manager’s termination decision that’s later alleged to be discriminatory can trigger an EPLI claim and related legal costs.
Smaller organizations, clubs, associations, retailers, contractors, and larger employers all purchase this coverage to protect against employment-related exposures. Good risk management — documented HR policies, timely investigations, and regular training — lowers risk but does not eliminate the chance of a lawsuit.
For more detail on policy features and options, see Employment Practices Liability (EPL) Insurance: Essential Protection for Employers, which outlines typical coverages and considerations.
If you're unsure how much coverage you need, talk to your agent to review limits and options for your business.
Frequently Asked Questions
Who can bring an EPLI claim?
Most claims are filed by current or former employees and sometimes by job applicants; third parties occasionally bring related claims depending on the situation.
What types of losses does EPLI typically cover?
EPLI generally covers legal defense costs, settlements, and judgments for allegations such as discrimination, harassment, wrongful termination, and some wage-and-hour disputes, subject to policy terms and limits.
Are there common exclusions I should watch for?
Yes. Policies often exclude intentional illegal acts, bodily injury (covered under general liability instead), and some statutory fines. Read policy language and discuss exclusions with your broker or insurer for specifics.
Still have questions? Talk to a local insurance expert.