Employment Practices Liability Insurance (EPLI) protects small businesses from those within their ranks. Most Small Business Owners understand the need for Workers’ Compensation and General Liability Insurance, small businesses should be worried about the ENEMY WITHIN. The employee base of a small business may pose the most immediate threat to its survival!
To help you understand Employment Practices Liability Insurance, we will answer these EPLI frequently asked questions:
- What is Employment Practices Liability Insurance for Business?
- What Does EPLI Cover? (common lawsuits)
- EPLI vs. Other Types of Business Insurance
- How Does EPLI Cost
- Do You Need Employment Practices Liability Insurance For Your Small Business?
What is Employment Practices Liability Insurance (EPLI)For Small Business?
Employment Practices Liability Insurance (EPLI) covers a business against claims filed by their employees. Potential EPLI claims may arise from various employment practices, including:
- New employee training
- Employee performance reviews
- Enforcement of company policies (or lack of enforcement)
- and more
Many employment practices lawsuits involve discrimination of some sort. According to the EEOC, North Carolina employees have filed an average of 3,560 discrimination claims every year over the past three years. This number does not include the number of claims settled outside of court.
Small businesses are at risk of employment lawsuits, just like large corporations. Depending on the insurance provider, EPLI may be offered as an endorsement to a Businessowner’s Policy or as stand-alone coverage. EPLI is not specific to different industries, so appropriate coverage must be determined on an individual business basis.
What Does EPLI Cover?
Potential, current, and past employees can claim their rights have been violated for a number of reasons, including:
- Failure to employ
- Sexual harassment
- Discrimination (race, gender, religion, etc.)
- Negligent evaluation
- Invasion of privacy
- Emotional distress
- Failure to promote
- Destructive discharge (forced to quit)
- Wrongful termination
- and more
It is very important to adhere to clearly defined employment procedures to avoid lawsuits. Though, it’s very common for un-founded lawsuits to be filed against businesses that follow proper procedures.
EPLI covers your legal costs against such claims, whether you win, lose, or settle. The Hiscox Guide to Employee Lawsuits estimates more than 10% of small to mid-sized businesses will face a discrimination charge of some kind. And that’s only discrimination charges, not including the other possible violations listed above.
In the same Hiscox study, it took an average of 318 days to resolve a claim with an average cost of $160,000 for cases that resulted in a defense and settlement payment. Business owners who carry EPLI would only pay their deductible or self-insured retention when such claims are covered by their policy.
EPLI covers business owners as well as directors, officers, and managers. With some policies, EPLI also covers employees.
EPLI vs. Other Types of Business Insurance
With similar-sounding names and acronyms, trying to understand the different types of business insurances can be overwhelming. Let’s clear up some of the confusion regarding EPLI and Professional Liability Insurance, General Liability, and Employer’s Liability Insurance.
Is Employment Practices Liability the Same as Professional Liability Insurance?
There is often confusion regarding Professional Liability Insurance vs. EPLI. Also known as Errors and Omissions (E&O), Professional Liability Insurance covers a business owner for third party claims of negligence. For instance, if your business failed to complete a service, E&O insurance would come into play. Whereas, EPLI covers employment-related claims, not client or third-party claims.
Do You Need EPLI If Your Business Has General Liability Insurance?
Employment practices are not covered under general liability. General liability covers third-party bodily injury or property damage. EPLI, however, covers in-house claims (not third-party) and does not deal with physical harm or property damage.
Is EPLI the Same as Employer’s Liability Insurance?
Despite very similar titles, Employment Practices Liability Insurance is very different than Employer’s Liability Insurance. Employer’s liability insurance covers claims of work-related illness and injury due to an employer’s negligence. Whereas, EPLI covers claims regarding an employer’s treatment of employees and potential employees.
Employer’s Liability Insurance usually falls under Workers’ Compensation Insurance. And, as mentioned before, ELPI is typically a stand-alone policy.
How Much Does EPLI Cost?
EPLI costs vary greatly from business to business. On average, annual premiums range from $20 per employee to $100 per employee per year.
The biggest factors that affect the cost of EPLI insurance are:
- Number of employees
- Rate of employee turnover
- Employment procedures
- Past claims
- Desired amount of coverage
- Desired amount of deductible or self-insured retention (SIR)
As expected, the more employees you have, the greater your risk of an employment lawsuit. So, most policies are primarily based on the number of employees your company employs at any given time. The other factors are then considered to form a complete risk profile for underwriting your policy.
Do You Need Employment Practices Liability Insurance for Your Small Business?
While every business owner should consider getting EPLI, not all small businesses need it. The best practice is to consult an Employment Practice Liability insurance provider to evaluate your risk. They can help you consider how much EPLI could lessen the blow of your worst-case scenario.
New small businesses with only a few employees are at relatively low risk. However, it only takes one employee to file a claim to rack up tens of thousands of legal expenses. If you determine your risk is negligible at the moment, be sure to reconsider each time your business expands. Remember, the more employees you have, the greater risk you are of being sued.
Should I get Employment Practices Liability Insurance?
If you are interested in learning more about Employment Practices Liability Insurance, ALLCHOICE would be happy to answer your questions. We serve North Carolina businesses and residents, with multiple offices throughout the state. Get your free custom quote by submitting a form online or contact us today.
Also learn more from: The Ultimate Business Insurance Guide