Employment practices liability insurance (EPLI) is a type of coverage that will protect your business from financial consequences that are associated with a variety of business-related lawsuits. EPLI will cover lawsuits that involve your company’s directors and officers, affect a company’s human resources department, and liability lawsuits.
EPLI can also protect against certain charges of racial or age discrimination, wrongful termination, and sexual harassment. It will usually cover charges that state noncompliance with the Americans with Disabilities ACT as well. EPLI can be used to protect businesses against legal conflicts that occur between employees and third parties like vendors and customers.
Employee lawsuits are a pretty big deal. They are must more than just an inconvenience. They are expensive, and are a huge distraction for your management team. They can quickly hinder productivity and employee morale. Unfortunately, employee lawsuits are becoming very common, and are making EPLI a necessity.
Employee lawsuits have risen roughly 400 percent over the last 20 years or so. Wrongful termination suits have jumped up more than 260 percent. These days, you are more likely to be sued by an employee than to have a fire at your business. But for some reason, only three out of 10 businesses carry EPLI, which can be a very expensive mistake.
Unless you have EPLI, your business is not covered against employee lawsuits. EPLI covers all court costs and legal fees, and will protect your business from the following and more:
- Wrongful termination – This is the most common claim brought against employers. It is illegal to terminate an employee on the basis of age, race, gender, national origin, or disability. A business can also be sued if they fire an employee for taking a leave of absence under the Family Medical and Leave Act or reporting wrongdoing to the authorities.
- Harassment – In most harassment cases the issue is sexual harassment. But in some cases of violence, bullying is an issue, as well as issues based upon color, age, religion, and race. The harassers can be senior managers, co-workers, supervisors, or even non-employers.
- Discrimination – discrimination cases involve employees who are turned down for employment based upon age, gender, race, or national origin. If an employee can show a pattern of discrimination in your business, then they probably have a winning case on their hands.
- Breach of contract – violating the terms of an employee contract can result in a huge lawsuit against your company. Also, any proof of damages to an employee due to the breach of the contract will usually result in a victory for your former employee.
- Emotional distress – If an employee feels like your business is aiding a hostile work environment, or they are really stressed in the workplace, they might sue. While these cases are usually difficult to prove, the legal fees for defending the case can be huge.
- Other violations – EPLI coverage doesn’t end with these few types of claims. It offers great protection for suits regarding statute violations, wrongful denial of workers’ compensation, loss of consortium, libel and slander, and false positive from drug tests.
Small business owners should select a reasonably priced EPLI policy, and then make any modifications necessary to fit their company’s individual needs. This is a standard operating system for insurers, and it can help ensure that the company is not left vulnerable to gaps in coverage. However, before you purchase a policy, look into the rights to retain counsel that it gives you. Many policies give the insurance company the right to designate counsel of its own choosing. In such cases than not, it will focus on the costs of the attorney rather than the quality of representation the attorney provides.
The majority of EPLI provide coverage of back pay, lost benefits, and legal fees. But, front pay, fines, penalties, travel, and cost of accommodations are not covered. So, make sure that you look carefully at what types of losses are covered before you purchase the policy.
Another option for small businesses in need of EPL insurance is a Business Owners’ Policy (BOP). A BOP provides basic property coverage for computers and other office equipment, as well as liability protection for work-related accidents.
A BOP might also include business interruption coverage which will maintain your company’s income stream for up to a year if a catastrophe disrupts anything. Many BOPs also offer optional coverage against power failures and mechanical breakdowns, liability for workplace practices. This includes discrimination, sexual harassment, and noncompliance with the Americans with Disabilities Act, as well as professional liability and other risks.
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