Employment Practices Liability Insurance Reflects Current Business Environment.

Employment Practices Liability Insurance (EPLI), typically covers allegations of discrimination, wrongful termination and sexual harassment of employees. A decade ago, when many insurance companies began taking large losses on these types of claims, Employment Practices Liability Insurance became a stand-alone insurance product for businesses.

Over the past decade, the number of discrimination cases has more than tripled in the United States, and a vast majority of these cases are filed against employers. Employment issues make up 30% of all civil litigation in the United States, and charges filed through the Equal Employment Opportunity Commission increase virtually every year. Publicly held companies, privately held companies and not for profit corporations are all at risk for being sued by employees and potential employees.

Employment Practices Liability Insurance Protect Businesses From Common Claims.

EPLI protects companies against claims that past, current and prospective employees of the company bring against the company, its directors and officers, and its other employees. Common employment practices violations include discrimination (based on sex, age, race, religion or other factors), sexual harassment (including "quid pro quo" harassment claims), wrongful termination, and a variety of other employment-related claims which violate employees' civil rights or their ability to perform their job in an acceptable and fair working environment. These types of claims can be extremely expensive to defend against, even if the court finds in favor of the employer.

What is also common about these types of claims is that they frequently consist of one person's word against another's. For example, if a candidate for a job feels she was passed over due to age discrimination, but the Human Resources Director who interviewed her says it was because another candidate was more qualified, the responsibility to make a judgment frequently rests with a jury who must decide which person they believe more. This type of case can be risky for a company to face, since many potential jurors may bring their own big-business prejudices to the jury.

EPLI Pricing Is Based On A Company's Size And Industry.

While risks to businesses have never been higher, fortunately the costs for acquiring Employment Practices Liability Insurance have dropped significantly. With many A-rated and A+-rated companies in the business of EPLI insurance, both premiums and deductibles are much lower than they were even five years ago. Pricing varies greatly depending on various factors (some listed below), but companies can expect annual premiums to fall in the range of $10,000 to $30,000 for companies with 25 to 100 employees. For larger companies, minimum premiums may begin as high as $25,000 and go up from there depending on many factors.

When quoting a policy for a particular company, insurance underwriters consider all of the following information in structuring the premiums and deductibles for a policy:

• The company's size (in terms of sales).
• The number of employees it has.
• The company's core business or industry.
• The company's claims history.
• The company's hiring and firing practices, as well as turnover rates.
• The company's written policies and procedures regarding employees.

Employment Practices Liability Insurance is not inexpensive, but the cost for coverage is just a fraction of what companies can pay when settlements go against them. Recent settlements in several states have topped $5 million for groups of workers who claimed they were let go of for reasons including demonstrated patterns of age and sexual discrimination.

Employment Practices Liability Insurance Pricing And Coverage May Vary Widely.

Businesses evaluating EPLI coverage should compare policies carefully to determine the value of the policy they purchase. Since there are not yet standardized forms of Employer Practices Liability Insurance coverage, prices and coverage do not always correspond. When reading through policies, do not assume the most expensive policy offers the most coverage. Carefully consider the subtle differences that can make a huge difference in your coverage – and your peace of mind.

For example, some EPLI policies do not cover all forms of employment-related communication. For example, some EPLI policies are silent on claims of wrongful termination of an implied contract; other policies clearly respond to this claim. Wrongful disciplinary actions and wrongful demotion are also covered inconsistently by Employment Practices Liability Insurance policies. And if your company or institution typically grants tenure to employees, make sure your EPLI policy covers "Failure to Grant Tenure" claims.

Other policies may have more narrow or broad definitions of who is insured. For companies who hire independent contractors to perform services for the company may be surprised to find their employment practices liability insurance does not cover these workers – even though these employees certainly have the right to sue the company. With more and more companies choosing to work with independent contractors, this risk is something companies should certainly consider when selecting an EPLI policy.

And of course, different policies may have different limits. As mentioned above, several high-profile settlements recently involved figures of $5 million and higher. While not common, these sizes of settlements are most likely to occur when a group of employees files claims which allege a pattern of inappropriate behavior against multiple individuals. Suits of this kind are increasing in frequency, so employers would be smart to carry enough insurance to protect against the worst-case scenario for their particular business.

Another important difference between policies is that some EPLI policies allow the employer to choose their own attorney in the event of a suit by employees. Other policies require that companies use an attorney assigned by the insurance company. Some employers may be concerned that the insurance company-appointed lawyer may be more inclined to settle a suit instead of

Employment Practices Liability Gains Meaning During Economic Downturns.

In a litigious age, there is always the risk of lawsuits from former employees who feel they have been treated unfairly by past employers. Many insurance experts say almost every business now needs EPLI coverage since lawsuits in this category are so common, and that companies should maintain Employment Practices Liability Insurance policies all the time to protect against this category of claims.

In economic downturns, however, companies often look for places to cut costs without cutting jobs. If EPLI is one place companies think they can cut costs for the short term, insurance experts warn that this can be a dangerous practice. They agree that now is not the time to cut Employment Practices Liability Insurance – and that in fact, the incidence of claims on EPLI policies is highest during tough economic times. Employees who are terminated and cannot find another job due to a recession in their industry are more likely to blame their former employer than terminated employees who move smoothly into a new job. For companies already suffering from economic downturns, the added strain of an Employment Practices lawsuit that is not covered by insurance can be a crippling blow to the company's economic recovery.

Does Carrying EPLI Coverage Affect Your Chances Of Being Sued By Employees?

Some companies do not like to divulge whether or not they carry Employment Practices Liability Insurance – or what limits they have on their policy. These companies feel that current and past employees, as well as candidates for employment, might see the company as a "goldmine" of potential settlement funds if they bring suit.

Insurance experts don't necessarily agree that carrying EPLI increases the likelihood that employees will view your company as a lawsuit target. What the insurance experts do recommend is undergoing an employment practices audit performed by a qualified law firm, then implementing internal training programs and written procedures to create verifiable proof that your company takes employment practices seriously. Often these actions can prevent suits from being brought against your company in the first place.

Employment Practices Liability Insurance Should Be Part Of A Comprehensive Business Insurance Strategy.

EPLI is just one piece of the insurance puzzle intended to protect your business from liabilities it faces every day. This coverage can be highly customized, and should be one part of a larger insurance strategy to protect your business from exposure to risks.

Employment Practices Liability Insurance may be bundled with Directors and Officers liability insurance, which are claims that allege misconduct by the officers of a company against individuals or groups affected by the directors' actions.