Employment Practices Liability Insurance: Why Your Company Should Consider It

Employment Practices Liability Insurance (EPLI) is becoming more commonplace as businesses struggle to keep up with litigious claims brought on by former and present employees or sometimes even job applicants.  While EPLI does not replace a proper HR infrastructure, it does provide an extra layer of financial protection when litigation does become an issue. 

How Does It Protect Your Business?

EPLIs help protect businesses against claims involving Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA).  However, it often does exclude certain situations involving Employment Retirement Income Security Act (ERISA), COBRA, Worker Adjustment and Retraining Notification Act (WARN), and the National Relations Labor Act (NLRA). An EPLI essentially covers a company’s cost of hiring a defense attorney, but does not cover any penalties awarded to the plaintiff. Typically the insurance company appoints an attorney, while in some cases, there is a pre-approved list of attorneys to choose from. Many companies, particularly those that are small to mid-size, cannot absorb the high costs of both hiring attorneys and paying out a large settlement.  EPLIs are beneficial because they help keep companies from going out of business even after a contentious and costly lawsuit.

What is the Cost?

The cost varies from company to company.  It depends on many factors including number of employees, lawsuit frequency, geographic location, and the type of business.  Additionally, insurance companies will not consider insuring you unless you have sound HR practices already in place.  

If your company is considering buying an EPLI policy, then please contact us at ModernHR.  One of our human resources experts will be happy to discuss how your company may benefit from using an EPLI.