Every employer, no matter how small, faces the specter of being sued by a past, present or prospective employee at some time.
In fact, such employment practices claims are widespread — so much so that most businesses are more likely to have an employment practices liability claim than a general liability or property loss claim.
Nearly three-quarters of all litigation against corporations today involves employment disputes, which can be extremely costly. The cost associated with an employment practices claim can be significant.
The cost of employee lawsuits against employers is increasing and the Equal Employment Opportunity Commission has been busy enforcing discrimination and harassment complaints, including a collecting a record-breaking $665 million in recoveries in fiscal 2023, up 30% from 2022.
Furthermore, the commission reported having one of the most litigious years in recent memory, with 142 new lawsuits filed, marking a 50% increase from 2022.
With this surge in activity, employment practices liability insurance is crucial for any employer. The risks of being sued by an employee for discrimination or harassment have increased substantially.
EPLI coverage
Policies cover:
- Defense costs (court fees, attorney fees and related costs).
- Payment of settlements and/or judgments up to the policy’s limits.
- Any fines or penalties levied by government agencies.
EPLI policies cover business owners as well as directors, officers and managers. Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients.
Types of action covered include:
- Discrimination based on gender, race, national origin, religion, disability or sexual orientation
- Sexual harassment or other unlawful harassment in the workplace
- Wrongful termination
- Failure to employ or promote
- Retaliation
- Employment-related misrepresentation
- Failure to adopt adequate workplace or employment policies and procedures
- Employment-related defamation or invasion of privacy
- Negligent evaluation of an employee
- Wrongful discipline of an employee
- Employment-related infliction of emotional distress.
NOTE: Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.
Costs
EPLI claims can be extremely expensive. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000.
Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns.
Call us if you want further information or need help in gauging your EPLI coverage needs.
