The purpose of third-party coverage in an Employment Practices Liability (EPLI) policy is to protect an organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers. Some EPLI policies also cover wrongful acts committed by third parties against the insured’s employees.
Harassment and all forms of discrimination are covered under wrongful acts. Discrimination claims include discriminatory practices based on race, religion, age, sex, national origin, disability, pregnancy, or sexual orientation.
Harassment involves unwanted sexual advances or requests for sexual favors and can include both verbal and physical conduct. Other forms of harassment that create a hostile or offensive work environment are also covered, and some policies extend to accusations of mental anguish, emotional distress, humiliation, and assault.
If your organization has a lot of interaction with the public, it is especially vulnerable to third-party claims like those described above, and some insurers limit coverage for higher-risk firms. For information on programs tailored to organizations with placement challenges, see Employment Practices Hard to Place.
In some cases, carriers might offer limited third-party protection, such as covering discrimination but excluding harassment claims. Specialty options and program variations are discussed in Employment Practices Liability Special Programs, which can help illustrate the differences in available coverage.
Purchasing coverage is not enough by itself; employers must implement clear policies and procedures that address both employee-on-employee issues and third-party conduct. Many EPLI insurers now require demonstrable prevention and reporting practices before issuing or renewing a policy, and franchise or industry-specific programs may offer tailored guidance—see Employment Practices Liability Insurance (EPLI) — Domino's Pizza Franchisee Program for an example of a program designed for a specific operator model.
Policies alone will do little to stop third-party claims if employees are not trained. New-employee orientation should include clear presentations on harassment and discrimination policies, including how to report and handle third-party complaints.
Training should be ongoing, not one-time. Periodic departmental meetings and updates help maintain awareness, and supervisors should receive copies of policy updates and procedural changes to ensure consistent enforcement.
One important caveat is that many EPLI policies do not provide third-party coverage for accusations involving the Americans with Disabilities Act (ADA). Review your policy’s definition of a claim, since many policies define a claim as a “demand for monetary damages,” which may exclude requests for non-monetary relief like reasonable accommodations.
Ensure your policy’s definition of a claim includes non-monetary claims so defense costs and indemnity related to ADA claims are covered, while recognizing that the policy will not fund changes needed to bring your organization into compliance with the law.
If you need help reviewing coverage options or policy language, consider talking to an agent to confirm your organization’s third-party exposure and compliance steps.
Frequently Asked Questions
What is third-party coverage in EPLI?
Third-party coverage protects an organization and its employees from allegations of wrongful acts committed against customers, vendors, clients, or suppliers.
Does EPLI cover harassment by customers or vendors?
Many EPLI policies cover harassment and discrimination committed by third parties, but coverage can vary and some insurers may limit or exclude certain harassment claims.
Are ADA accommodation requests covered as claims?
Not always—if a policy defines a claim only as a demand for monetary damages, requests for reasonable accommodation may be excluded unless the definition includes non-monetary claims.
What steps reduce the risk of third-party claims?
Implement clear policies, provide initial and periodic training, document procedures for reporting and response, and ensure supervisors receive policy updates.