What is Employment Practices Liability Insurance?

What is Employment Practices Liability Insurance?

Employment Practices Liability Insurance (EPLI) is a type of liability insurance that provides an employer coverage for legal defense costs should a lawsuit be brought against the company for a wrongful act in the employment process.

While different carriers may manuscript their own forms, all General Liability policies include a version of ISO’s standard Employment-Related Practices Exclusion, which states: “This insurance does not apply to: Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or malicious prosecution directed at that person”.

Why Should Insureds Buy Employment Practices Liability Insurance?

With the business world becoming more and more diverse by the day, it is important to remember that perception is someone else’s reality. Here are 10 reasons why Business Owners should purchase Employment Practices Liability Insurance (EPLI):

  1. EPLI covers not just actual, but also alleged acts of discrimination, harassment, demotion and other similar acts.
  2. Three out of five employers are sued by former employees every year.
  3. Over 40% of EPLI claims are against companies with fewer than 100 employees.
  4. Some federal and state employment laws apply to all employers – every size company has this exposure!
  5. In 2018, the Equal Employment Opportunity Commission (EEOC) recorded 76,418 charges and obtained more than $505 million in settlements for claimants. The EEOC received over 519,000 calls, 34,600 emails and more than 200,000 inquiries on this topic this past year.
  6. The financial ramifications of not having EPLI can be crippling, especially for small companies because they do not have the operating budgets to handle the defense costs, let alone settlements or judgments, of an uninsured claim.
  7. The median compensatory award to plaintiffs is $325,000.
  8. Wage and hour litigation has quadrupled in recent years. More wage and hour collective/class actions have been filed in recent years than any other types of employment class actions combined.
  9. Gender discrimination, age discrimination and retaliation claims are on the rise, as well. There are more women and Millennials in the workplace than ever before. Recent Supreme Court decisions have lowered the standard of what constitutes retaliatory treatment. In 2018, 51.6% of all cases to the EEOC were charges of retaliation.
  10. With the current “Me too” movement providing much steam, there was a 13.6% increase from 2017 in sexual harassment claims, which cost employers $56.6 million in 2018.

Who Needs EPLI Coverage?

No employer plans to have to defend their employment practices in a courtroom when they start a business. We all think: “this won’t happen to me, I’ve got it all figured out. Why would I need this coverage?” However, coming up with a risk management program is all about planning for the unexpected and for situations that could land your company in some trouble. Simply put – any business with employees is at risk for an employment practices suit. All it takes is one angry or dissatisfied employee, one applicant, or one mishandled incident that is reported to the EEOC or Department of Labor to land your business in that dreaded courtroom.

At Brown & Brown, we are experts in this line of coverage, and we would love to work with you to help better protect your business.


Tyler LeRoy, CLCS