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Employment Practices Liability Insurance
What is it?
Employment Practices Liability Insurance (EPLI) was introduced into the insurance marketplace in the early 1990's with the passage of various federal and state statutes protecting the rights of employees. The Americans with Disabilities Act of 1991 (ADA) was enacted to prohibit discrimination against qualified individuals with physical or mental disabilities. Under the ADA, the definitions of protected class and disability have been broadened to include individuals with mental impairments, handicaps, obesity, those over 40, etc.
The ADA in conjunction with the Civil Rights Act of 1991 permitted, for the first time, trial-by-jury as opposed to trial-by-judge. This also introduced the recovery of compensatory and punitive damages under Title VII of the Civil Rights Act of 1964. With trial-by-jury, plaintiffs began seeing large awards since a jury is comprised of other working people who tend to be sympathetic to employees and not employers.
With the growing awareness of employee rights, there has been a rapid increase in the number of employment related claims. Companies of all sizes, in all industry segments, private and public are vulnerable to employment related claims. Wrongful employment practices can include a wide number of allegations. The most common include discrimination claims alleging mistreatment by employers based upon race, gender, religious background, disability, sexual preference..
Do you need it?
While there is no full-proof method of guarding against EPLI claims, you can take positive steps toward reducing your liability in the event of an EPLI claim. Risk management procedures should include an employee handbook, at-will statements, clearly defined employee evaluation procedures, grievance procedures and documentation. Many carriers writing EPLI coverage offer free risk management services to their policyholders, including hotlines and legal services that provide
advice on employment-related practices.
No company is too small for EPLI coverage. In addition to coverage for the award and/or settlement amount, defense cost coverage is also included. While many employment-related claims go to trial, most are settled out-of-court as employers generally prefer that these claims go away as quickly as possible. Even when a claim is considered frivolous, costs are incurred to defend the allegation until final disposition. The EPLI policy mitigates this out-of-pocket expense.
Employment Practices Liability Insurance has been one of the fastest growing areas of coverage in the last ten years. As employees continue to exercise their rights under various state and federal statutes, employers are well advised to purchase and secure EPLI coverage in order to be protected in the event of an EPLI claim.
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