Employment practices liability insurance (or EPLI), protects employers against claims made by employees for things like discrimination, sexual and other types of harassment, or wrongful termination.
Small business owners often think they’re immune from these types of issues because they know their employees and consider them to be members of the family. The truth is that small businesses are as likely to be sued over employment related issues as big companies. They’re more vulnerable than larger operations because they don’t have human resource experts and legal teams to help fight against lawsuits when they happen.
In this article, we’ll explain the risks small business owners face when it comes to employee lawsuits, why they need business practices liability coverage and everything they need to know to secure this important protection. PLUS we’ll reveal our top 6 picks of insurers when it comes to EPL coverage.
- Top 6 providers of employment practices liability insurance
- What does employment practices liability insurance (EPLI) cover?
- Who needs employment practices liability insurance?
- Do certain types of employees present a greater risk of employment lawsuits?
- How can I reduce the risk of employee lawsuits?
- What does EPL insurance not cover?
- How much does EPL insurance cost?
- How do I get employment practices liability insurance?
Top 6 providers of employment practices liability insurance
Here are our recommendations of the 6 best providers of the employment practices liability insurance (or EPLI)
- CoverWallet: Best for comparing quotes online
- Next: Best online experience
- Travelers: Best for EPL coverage from a highly experienced provider
- Nationwide: Best for businesses in certain industries looking for enhanced coverage
- The Hartford: Best for businesses looking for a sound and ethical insurer
- Chubb: Best for companies that have industry-specific insurance needs
CoverWallet: Best for comparing EPLI insurance quotes online
CoverWallet is a digital broker specializing in small business insurance. They work with several leading insurance companies and are able to pull quotes from these companies for you to compare and select the best one for your business.
Their online quoting process is fast and simple. You can get several quotes for your business within 10 minutes or so. In some cases, if your business is a bit more complicated or the coverage that you are seeking is more nuanced, they may not be able to provide quotes online. But they can provide several quotes on phone after clarifying these details.
After buying a policy through CoverWallet, you can manage all of your business insurance policies using their digital dashboard. CoverWallet earns a good customer rating (A) on BBB as well.
Next: Best online experience
Next is changing how small business owners purchase insurance.
Their operation is focused on delivering the ultimate online insurance experience. Because of this, you’re able to purchase a policy, file a claim or get a certificate of insurance any place, any time, 365 days a year. While Next is an online insurer, you can get expert help over the phone when you need it. The firm is also known for being able to make most claims decisions within 48 hours.
Even though Next is a relatively new and innovative company, you can rest assured knowing it has an excellent rating from A.M. Best, an insurance company rating agency. All the company’s policies are backed by MunichRe, an established insurance firm and reinsurer. More than 10,000 business owners have turned to Next for their insurance needs. The firm has earned a solid 4.7 customer rating.
One caveat about Next: It offers insurance coverage for a limited number of industries. And it does not offer EPLI as a stand alone insurance offering. Instead, it offers EPLI as an additional endorsement to other policies such as Business Owners Policy or general liability coverage.
Travelers: Best for EPLI coverage from a highly experienced provider
Travelers is a leading provider of employment practices liability insurance in the United States. The company has been in business for more than 165 years and is the only property casualty company in the Dow Jones Industrial Average.
Travelers is known for its:
- Flexible solutions. It has insurance packages tailored to different industries that can be customized for individual businesses.
- Responsive and reliable service. An experienced professional is always available to answer your questions about EPL coverage and other types of insurance or to help you with a claim.
- Innovation. Even though Travelers has been around for a long time, it’s known as a leading innovator in the insurance industry.
In the end, Travelers offers quality EPL and other types of protection for businesses in many industries. You owe it to yourself to see if this industry leader could be the right insurer for your business.
Nationwide: Best for businesses in certain industries looking for enhanced coverage
Nationwide is one of the largest insurance companies in the United States. It offers insurance for small and large businesses in all industries, but is best known for its packaged solutions designed for construction and contracting businesses. These packaged solutions make it easy to bundle different types of business insurance including employment practices liability insurance with your other coverages.
Nationwide has been around since 1926. It has a solid reputation and is known for its high level of customer satisfaction. Nationwide’s online quote system is a bit undependable, but you can always get a quote over the phone.
The Hartford: Best for businesses looking for a sound and ethical insurer
The Hartford is one of the oldest companies of any kind in the United States. It’s been offering insurance solutions for more than 200 years and has helped one million plus businesses with their insurance needs. The company takes pride in the fact that the Ethisphere Institute named The Hartford a World’s Most Ethical Company twelve times. The Hartford’s longevity and focus on ethical business practices makes it a company that you can feel good about doing business with.
The Hartford’s dedicated and highly experienced small business team is available to help company owners explore their EPL and other commercial insurance options. If you decide to purchase insurance from The Hartford, you can rest assured knowing you’re entrusting your business to a strong, stable, knowledgeable and ethical provider.
Chubb: Best for companies that have industry-specific insurance needs
Chubb is the largest publicly traded property and casualty insurance company in the world.
Chubb focuses on understanding the unique risks of businesses in different industries including technology, healthcare and real estate. That means your EPL coverage can be combined with other coverages (Chubb has more than 30 of them) to protect against the risks of any company in virtually any industry.
Because the experts at Chubb have such a deep understanding of the risks faced by businesses in many industries, they have programs — and are able to offer advice — on how to reduce risks in the workplace, including ones related to employment practices. Not only is lowering risk levels the right thing to do, it can help reduce your EPL and other business insurance costs.
What does employment practices liability insurance (EPLI) cover?
Employment practices liability insurance (EPLI) covers employers when their employees sue them for the following claims:
- Discrimination (related to sex, race, age, disability and other factors)
- Wrongful termination
- Sexual and other types of harassment
- Breach of employment contract
- Negligent evaluation of employee performance
- Not employing someone after they’re interviewed for a job
- Wrongful discipline
- Emotional distress
- Mismanaging your employee benefits plan
- Other employment-related issues, such as failing to promote someone who believes they deserve it.
We can see in the news more and more employees suing their employers for various reasons, including the high profile cases such as:
- 11 Fox News employees suing their employer over alleged racial discrimination; or
- Fox’s anchor Gretchen Carlson suing Fox’s executive Roger Ailes over sex harassment claims that Fox News had to settle for $20 Million; or
- Ellen Pao, a female VC partner at one of the biggest Silicon Valley VC firms, used her employer, Kleiner Perkins, for bias discrimination against her. However she lost the case in trial.
Big or small companies are facing these lawsuits from their employees. These lawsuits cost a lot of money in defending, even when they win. Employment practices liability insurance (ELPI) protects the employers in these cases.
Who needs employment practices liability insurance?
Large corporations typically carry a significant amount of this insurance so they’re prepared to handle any employment lawsuit they could face. However, small or new businesses are often the most vulnerable to employment related claims. That’s because they don’t typically have a legal department, robust human resource function or employee handbook detailing the policies and proper procedures related to hiring, disciplining, terminating and treating employees. That’s why it’s a smart move for them to secure EPL coverage.
Do certain types of employees present a greater risk of employment lawsuits?
New employees are more likely to sue your business over employment related issues than long-time ones. You’re at risk of a lawsuit from the moment you interview a prospective employee. If you decide to not hire a person you interview, they could allege discrimination played a part in your decision. Or, if you hire that person and later fire them due to poor attendance, that discharged employee could claim wrongful termination. Disgruntled employees often take out their frustrations through lawsuits. You should secure EPL coverage prior to interviewing or employing new workers.
How can I reduce the risk of employee lawsuits?
To reduce your chances of employment lawsuits, consider the following:
- Review your risks with a business insurance agent or company representative and purchase adequate employment practices liability coverage.
- Work with an experienced human resource professional to develop an employee handbook outlining your organization’s workplace policies and procedures. It should cover things like attendance, complaints, discipline procedures, and most importantly, employment at will and equal employment opportunity statements.
- Create job descriptions for all positions that clearly set expectations for required education, knowledge, experience and skills, along with expectations for performance.
- Conduct regular performance reviews for employees and maintain a record of results in each employee’s file.
- Develop a screening program that weeds out unsuitable or risky candidates prior to an interview. Your legal counsel could help you figure out a way to do this that won’t get you into trouble.
- Always use an employment application or process that includes an equal employment opportunity statement, along with a statement that explains employment will be at will, which means anyone can be terminated at any time, for any or no reason, without notice.
- Check that your application for employment does not contain any age indicators (for example, asking for a high school graduation date) to prevent age discrimination claims.
- Conduct thorough background checks on all candidates and contact references.
- Implement a zero tolerance discrimination policy.
- Maintain an open door policy, encouraging employees to speak with you about workplace issues.
- Keep careful real time records about employee issues and what steps were taken to resolve them.
While this may seem like a lot to do to reduce the risks of employment related lawsuits, It’s nothing when compared with having to deal with a legal case.
What does EPL insurance not cover?
There are losses and claims an EPL policy will not cover, including:
- Penalties
- Civil fines
- Criminal fines
- Unpaid wages
- Liabilities for acts of intentional or dishonest wrongdoing
- Claims related to unemployment benefits
- Claims related to employee injuries that happen while working, which are covered by workers’ compensation insurance.
How much does EPL insurance cost?
The cost of employment practices liability coverage depends on several factors including:
- The number of people who work for you
- Your company’s history of employment lawsuits
- Your employee turnover rate
- Whether you have documented rules and practices in place.
A business insurance agent, company representative or online quoting system can provide you with a quote for EPL coverage.
How do I get employment practices liability insurance?
As a small business, the easiest way to get this coverage is as an endorsement on your Business Owners Policy (BOP) or general liability policy.
This coverage is usually provided on a claims made basis, which means a claim has to be made when the insurance coverage is in effect. This could leave you vulnerable if someone makes an employment claim after your coverage expires, which could be the case since many disgruntled workers wait months or years after an incident to sue their employer. In order to cover this, you need to maintain coverage or purchase tail coverage, which extends the time to make a claim on an expired policy.
Bigger companies typically get a separate stand-alone EPLI policy.
