Employment Practices Liability Claims Commercial Insurance

Employment Practices Liability: Claim Examples


If you have a commercial lines insurance agent worth the effort, they have hopefully mentioned Employment Practices Liability to you before.

It’s one of those coverages they might mention to you each year, and it’s acknowledged and then glossed over. One day, if you get served by an employee, former employee, or candidate, you may wish you hadn’t set it aside.

In a lucky scenario, your agent or insurance carrier would have added at least a token amount of EPLI coverage. Sure, it could only be $10,000 per occurrence, but it’s something.  That only matters in that it is better than nothing, but still not adequate in this day and age.

What Is Employment Practices Liability?

Employment Practices Liability Insurance, otherwise known as EPLI, is protection for businesses from lawsuits. These suits come specifically from allegations or workplace or hiring discrimination, harassment, and wrongful termination. This can also take other forms, such as “failure to promote,” but is all along these same lines.

These claims are on the rise, and even if you win the case, the legal defense costs may get very expensive. Defense cost coverage is a good reason to buy many different types of insurance in general.  With EPLI, as with (for example) Professional Liability, the insurance company will pay the costs to defend the suit whether or not they are baseless or frivolous claims.

EPLI Claim Examples

The following are theoretical situations under which an Employment Practices Liability claim could be generated. If you have EPLI coverage, defense cost coverage is available, and may be included — be certain to check with your agent or broker. Whether or not the plaintiff wins a judgment is an entirely separate matter.

Sexual harassment. Jane Doe, a new employee, is the target of unwanted advances by her supervisor. She thinks of complaining to Human Resources immediately, but doesn’t because she’s afraid of getting fired. Eventually, she speaks up to HR, but is dismissed days thereafter. Jane Doe brings suit against her former employer alleging the harassment, and that she was wrongfully terminated in retaliation.

In this case, Jane has a solid case for damages, but in addition, the defense costs to the company alone could be quite steep.

Failure to accommodate and/or disability discrimination. John Roe, a middle-aged employee with a chronic back condition, is hired for a manufacturing plant job. In his interview, he stressed that he could perform light physical duties as a result of his physical impairment. The interviewer, in turn, made clear that the demands of the position would meet his physical restrictions. After the hire, however, John Roe was put into a job more demanding than what he believed he was hired to do. Moving more slowly than his associates, he was fired after a few weeks for inability to perform. John Roe sued his former employer for wrongful termination based on hiring him knowing his disability and then failing to accommodate him.

Whether or not John Roe wins the case, again, the cost to defend the suit is a critical coverage protecting the employer.

Hostile work environment. Betty Smith, a secretary at a mid-sized law firm, sued her employer on the grounds that she suffered harassing comments from several coworkers and intimidation by her supervisor. Her supervisor, for example, would publicly threaten her position if she made even the slightest mistake. Some of her coworkers made comments in her presence about her physical appearance on a regular basis.

Employment Practices Liability (EPLI): The Bottom Line

Should your company find itself the target of an Employment Practices Liability suit, as with any claim, it can be a stressful time.  Having the appropriate insurance will not destress the situation, but it can give a certain comfort that your company will not necessarily bleed cash defending the suit in court.

Many reputable insurance carriers offer EPLI coverage, and you may even get to place it as part of your General Liability policy.

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