EPLI Coverage: Is It In Your Toolbox?
“Start with good people, lay out the rules, communicate with your employees, motivate them and reward them. If you do all those things effectively, you can’t miss.” This concise business advice was offered by Lee Iacocca. His counsel at first may appear easy enough to follow; however, business owners and managers from doctors, restaurateurs, resort owners, to youth camp owners often find themselves embroiled in claims brought by workers stating their legal rights as employees of the company were or are being violated. How would you handle such a claim? Do you have EPLI Coverage? Is it in your toolbox?
EPLI Coverage Defined
While many sources offer a definition for Employee Practices Liability Insurance (EPLI), our John Bailey Company team feels that provided by the International Risk Management Institute, Inc (IRMI) is complete and easy to understand:
“Employment Practices Liability Insurance (EPLI) — a type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds. The most common exclusions are for bodily injury (BI), property damage (PD), and intentional/dishonest acts. EPLI policies are written on a claims-made basis. The forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy. In addition to providing directors and officers (D&O) and fiduciary liability insurance, management liability package policies afford the option to cover employment practices liability (EPL).”
To further assist current and future clients, our John Bailey Company president Brandon Clarke created this helpful outline discussing EPLI. Go ahead, you can add it to your commercial insurance toolbox.
EEOC and EPLI Coverage
The U.S. Equal Employment Opportunity Commission (EEOC) was established in 1965 with the following being its mission: Prevent and remedy unlawful employment discrimination and advance equal opportunity for all in the workplace. Employers with at least 15 employees are covered by EEOC laws, while employers with at least 20 employees are covered for age discrimination cases. Additionally, employment agencies and most labor unions are covered.
In 2017, the EEOC received 84,254 complaints for discriminatory employment practices. One-third of those claims were filed against small businesses. These complaints can average up to 97,500 claims per year.
It is also important to remember that each state may have laws that impact how claims are handled. Our own State of Tennessee is an employment-at-will state, meaning either the employer or the employee may end the employment relationship at any time, without notice or a reason. You can learn more about the exceptions to Tennessee’s employment-at-will doctrine here.
Statistics are helpful, but filling your toolbox is critical…
There is much news about the efficacy of considering and obtaining EPLI coverage; for example, the #MeToo sexual harassment claims that have filled the media over the past couple of years. Some offer that EPLI coverage is now critical for all businesses. Even new laws, like updated overtime rules, can impact the need to review your EPLI coverage.
The cost of EPLI coverage will depend on many factors like the type of business, number of employees, and EPLI claim history. Meanwhile businesses can plan ahead and be proactive. The Insurance Information Institute (III) suggests the following:
“To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
- Create effective hiring and screening programs to avoid discrimination in hiring.
- Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
- Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
- Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.”
Each of these suggestions will enhance your toolbox.
Our John Bailey Company team is here to help you insure a great life…
We know that commercial insurance is one of the most important investments you can make as a business owner. In fact, it may even mean the difference between sinking and staying afloat should damages or a lawsuit occur. Choosing good commercial insurance, including EPLI if necessary, can protect your business from severe financial loss – and our team can help guide you in your search for the perfect policy.
If you are starting a new business or have recently taken a new position at a company that includes overseeing insurance needs, please contact us today. We promise integrity, service and expertise.