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Employment Practices Liability Insurance

Protect your business from the potential losses involving employment litigation. Lawsuits from disgruntled potential or past employees Employeesagainst business owners is part of the legal environment today and even false claims expense to defend.

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What is Employment Practices?

Employment practices include your process of interacting with your hired help. This includes the hiring process, how employee discipline and promotion is handled, employment contract disputes and the termination process. Another source of employment practice related claims has to do with alleged discrimination in hiring and promotion. An example is gender bias in promoting men over qualified women or failure to consider minority job applicants fairly.

Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI) is protection for claims based on alleged failure to handle employment relationships to legal standards. There are both State and Federal statues that set these legal standards including ADA (Americans with Disability Act), Equal Pay Act of 1963 and the Civil Rights Act of 1964. Equal employment opportunity  is the law. At the Federal level, the employment practices statues are enforced via the EEOC (Equal Employment Opportunity Commission).

EPLI is offered as a "Claims Made" type of liability contract. This means that the claim event both has to occur during the coverage period and also be reported within a specified reporting time-frame. See below for more information on a Claims Made policy form.

EPLI can be sold as a stand-alone policy. For most small to medium sized businesses, it is normally bundled with their main insurance plan such as a Businessowner's package or a Director's & Officers insurance plan.

A basic EPLI plan will include coverage for legal defense costs to handle a potential claim event up to a specified limit. Broader EPLI packages can include insurance coverage for the added risks of government fines, third-party claims and punitive damages. Liability limits are typically offered up to $1 million.

Claims Made Form

A "Claims Made" Liability form will respond to a claim event that occurs during the time the policy is in force or its retroactive date and also reported during the allowed reporting period. A normal reporting period is the policy term plus sixty days. A "Claims Made" Liability policy can lead to an additional vendor requirement of "Tail Coverage" (extended reporting period for claims) which can be a  large, additional expense.

Important Terms for a Claims Made Policy

Retroactive Date - When you buy a renewal of your Professional Liability Insurance contract, you want to include your prior policy period in your new plan. This so-called "Retroactive Date" is the start of your continuous coverage. If a Professional Liability claim erupts that happened in this prior contract period (i.e., after the "Retroactive Date") but is reported during the current policy term, the current Product Liability policy will respond to it. Insurance companies will rate for this added retroactive exposure.

Standard Reporting Period - The time during which the insurance company will respond to a reported claim. This is normally the policy term plus sixty days beyond the expiration of the policy.

Tail Coverage (Extended Reporting Period) - This is an extended reporting time period that can be purchased when a policy is not renewed in which a claim during the policy term can be reported and the insurance respond. Tail Coverage is typically sold in year increments and is often quite expensive.