What Is EPLI Third Party Coverage?

Estimated reading time: 7 minutes

Return To: Employment Practices Liability Insurance (EPLI) – The Ultimate Guide 

Perhaps one of the most unfortunate aspects of modern day society is the still-prevalent issue of unlawful or illegal labor practices. While it may be so that the legalities of employment can be said to be a modern invention, the fact that people and organizations still perform acts that are contrary to such codifications deserves serious attention. 

Determining why such things still occur despite our modern advances in science and technology is a question for another day. What is essential is dealing with the problems of the present. In this regard, what would be wise is to accept the fact that these illegal labor practices are bound to happen, one way or another, and with it shall also follow a herd of lawsuits looking to graze. 

This reality has become so ingrained, so well-known, that market forces have come to recognize and accommodate it as a form of risk that needs to be managed accordingly. This is why personal liability insurance came to be, but in this regard, it is employment Practices Liability Insurance or EPLI. 

Time and again, people engaged in all kinds of business undertakings are hesitant to say that part of the risk of doing business is the risk of litigation, whether from your employees or customers. As such, EPLI is constantly touted as one of those essential purchases that needs to be a part of your business structure. Not only that, but quite recently, EPLI’s younger sibling, Third Party EPLI, is now also being made a part of that recommendation.

But what exactly is EPLI? What about Third Party EPLI? Do you need both or would settling with just the Standard EPLI Insurance Coverage suffice?

Here at ALLCHOICE Insurance, we believe that putting people first before everything else is key to making society a better place for all. 

We believe that it is both our duty and corporate responsibility to help you become better-equipped with the right amount of knowledge about insurance products so as to help them make better decisions for themselves and their business.

Allow us to be your guide into understanding EPLI and Third Party EPLI.

What is EPLI?

EPLI stands for Employment Practices Liability Insurance. EPLI provides coverage for business against lawsuits filed by their employees against them on the basis of alleged transgressions over their labor rights as employees. 

EPLI provides protection for, but is not limited to, the following kinds of lawsuits:

• Discrimination
• Wrongful termination
• Breach of employment contract
• Sexual harassment 
• Negligent evaluation
• Deprivation of career opportunity
• Failure to employ or promote

An example of an insured event that is covered by EPLI is when an employee is removed from the company without the existence of a valid cause. If the lawsuit proceeds, the EPLI may protect the insured and cover for any and all resulting financial losses due to the lawsuit. 

What is Third Party EPLI Coverage?

Third Party EPLI is part of an add-on for Employment Practices Liability Insurance and, unlike the standard EPLI, pertains to lawsuits filed by non-employees, such as customers, visitors, or clients. For the most part, these lawsuits will usually involve either discrimination or sexual harrassment. 

An example of this is when a customer or client enters your business premises and one of your employees either catcalls or throws racial slurs against him or her. In that case, the Third Party EPLI shall come into play similar to the EPLI.

Is Third Party EPLI Coverage Beneficial?

Ideally, today’s social climate arguably necessitates the presence of third party EPLI coverage. It must be remembered that the point of insurance, after all, is to act as a safeguard against risks. In effect, this gives the policy holder both peace-of-mind and less emotional and financial stress. 

Do note that adding Third Party EPLI to your base EPLI will mean adding an approximate additional premium charge of 15% of the base EPLI premium. If money is an issue for your business, then consider understanding the nature of Third Party lawsuits first. 

Third Party EPLI covers sexual harassment, for instance, and according to one statistic, those in the accommodation and food service industry face the most sexual harrasment lawsuits compared to other industries. We can see this statistic in the graph below:

As you can see, certain industries face greater risks of sustaining a sexual harassment lawsuit than other types of businesses. 

As a good practice for decision-making, consider taking into account this data and see if your business falls within the top five industries therein recorded. Even so, if you believe yourself to be capable of managing the risk of a third party lawsuit, then you may decide for yourself, accordingly. 

However remember that, above all else, having that extra protection in the form of extra financial coverage and peace-of-mind can go a long way for yourself and your business. 

Real-Life Examples of Third Party EPLI Coverage Claim Cases

One interesting case that’s worthy of knowing is the Starbucks discrimination lawsuit in New York. According to the charge, Starbucks employees allegedly discriminated against a dozen customers, some of whom were deaf and were simply having a meeting inside the branch premises. The lawsuit also alleged that the Starbucks employees would sometimes mock and make fun of the deaf members of the group. At one point, the same employees called the police to report a disturbance against the group during one of their monthly meetings. 

For a big business chain like Starbucks, we can only imagine the costs of the lawsuit, however true the allegations may be or otherwise. 

In another interesting case, a woman in Boston sued a gas station, claiming that one of its workers sexually harassed and assaulted her while she was having her vehicle filled up with gasoline. According to the charge, the gas station employee not only made lewd gestures in front of her but also intrusively touched her without her consent. She also claims that another employee was present during the incident, but had simply watched and allowed the harassment to happen. 

But what is certainly the biggest and most interesting case of all is the Denny’s discrimination lawsuit, which happened way back in 1996. In case you’re not aware of it, the discrimination lawsuit against Denny’s came to the fore when thousands of disgruntled African-American patrons collectively sued the restaurant chain for alleged discriminatory practices against them. 

According to one claim, a black Federal judge sought to dine at a local Denny’s with his wife but was forced to wait for more than an hour before being serviced whereas white patrons were serviced before them. 

In another claim, six African-American Secret Service agents were refused a table at another local Denny’s despite their white Secret Service colleagues not having the same problem being seated. Denny’s, of course, officially denies ever having a policy of discrimination against non-white customers. In the end, though, the court saw it fit to order Denny’s to pay an enormous $54 million in reparations and damages. 

Should My Small Business Get Third Party EPLI Coverage?

There’s no question that small businesses face the challenge of financial constraints on a monthly, if not daily, basis. As such, the financial aspect of getting Third Party EPLI Coverage would definitely be the primary concern of a small business owner. 

However, in the world of insurance, where risk and lawsuits are an inevitable part of life, having a larger, forward-looking perspective can help you decide on this matter. 

Financial constraints are simple concerns that can be addressed quite easily, at least in comparison to a court order calling for payment of reparations or compensation to a plaintiff or group of plaintiffs. While it may be true that the risk of such this happening to a small business is minimal at best, operating your business without these risks would be far better than gambling at the chance of your business being subjected to these kinds of lawsuits. 

A lawsuit can end your business and your career; whereas a financial constraint can be treated as a mere, slight inconvenience on most days. 

That being said, as earlier stated, consider noting down which industries are the most commonly subjected to harassment and discrimination lawsuits. Then, try to assess the probability of your small business being subjected to such kinds of incidents. 

Why Should I Contact ALLCHOICE?

ALLCHOICE Insurance guarantees not only an above and beyond service for every type of customer, but we also make sure that contracting with us will never result in any financial or emotional stress on your part. 

We’re here for you. Contact us today for a quote and to learn about your initial insurance needs at no cost to you. We can’t wait to hear from you!