Wondering if Employment Practices Liability Insurance (EPLI) is necessary for your business? Do you have employees? Will you be hiring employees? Then the answer is unequivocally YES! Your business is at risk from the moment you interview a prospective employee. Current, former, or prospective employees have the ability to raise a claim, whether one is warranted or not. Therefore, you should have EPLI in place before you ever hire your first employee.

EPLI covers wrongful acts arising from employment processes. Examples of this can be a claim of wrongful termination, discrimination, sexual harassment, or retaliation. Defamation, invasion of privacy, failure to promote, deprivation of career opportunities, and negligent evaluation also fall under this category. Third-party EPLI is usually a separate insuring agreement, covering liability claims brought by nonemployees (typically customers, clients, and vendors) against employees of the business. You should ensure your policy has both first-party and third-party EPLI.

With the litigious nature of today’s work environment, the number of employee versus employer lawsuits are on the rise. These claims are among the most expensive claims a business can face and can be hard to substantiate facts. Unfortunately, a business does not have to be in the wrong to be sued. Even if the claim is dismissed, the defense costs in attorney fees alone can be considerable. For this reason, we are seeing many franchisors wisely implementing EPLI coverage requirements in their Franchise Disclosure Document updates.

At Program Insurance Group, we work with many franchise brands and see lapses in the area of EPLI all too often, lapses which could end up costing a business greatly. Many business owners opt out of EPLI due to two very common misconceptions. First, they think their other insurance policies, such as Worker’s Compensation, will cover these types of lawsuits. Second, they believe their employees would never sue them. Believing either one of these ideas can lead to a critical gap in insurance coverage. For more on common business insurance buying mistakes, click here.

Employer’s Liability, which is part of Worker’s Compensation, is not the same as Employment Practices Liability Insurance (EPLI) and it will not cover employee discrimination claims. In general, Employer’s Liability covers physical illness and injuries an employee sustains while on the job, as part of the Worker’s Compensation policy, where a lawsuit is then brought against the employer. Whereas EPLI protects a business if a claim is filed related to the violation, or perceived violation, of an employee’s rights in the hiring, firing, and managing respect.

New and rapidly growing companies are particularly vulnerable to being caught up in such employment cases. With underdeveloped procedures in the areas of hiring, firing and disciplining employees, human resources mistakes are inevitable, and without proper coverage they could severely cripple your business.

If you employ even just one person, you are at risk for an employment related claim. These claims are expensive and distractive. With EPLI coverage, you can mitigate the damage from such costly lawsuits and keep your business running with minimal disruption.

Program Insurance Group has a highly trained and dedicated team of insurance professionals here to help you with navigating your insurance requirements. Offering our expertise, we will find the best insurance solution to fit your individual business needs. For more information on protecting your business with EPLI insurance, contact us here.