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What is Employment Practices Liability Insurance (EPL)?

Updated: Sep 25, 2019



Employment Practices Liability (EPL) is commercial liability insurance that covers damages claimed by an employee (and sometimes others) arising out of wrongful hiring, firing, harassment, sexual harrassment and discrimination claims. Since the Global Financial crisis of 2008, the frequency of these claims have increased as a result of massive layoffs. These claims are not catastrophic in nature but are a more of a threat due to the frequency. What is nice about EPL coverage is it will provide coverage from a suit even if a claim is baseless. Often these claims can be settled between the claimant's legal representative and the insurance company out of court, but each case is unique.


Examples:

A graphic designer hired in 2001, resigned her employment claiming

that she had been subjected to sexual harassment and gender discrimination. Specifically,

she named four managers/directors of the insured as wrongdoers. The insured performed

a thorough investigation and terminated three of the four people involved, but the evidence

collected showed a long series of sexually explicit emails, jokes and comments in the

workplace. The claimant was making $45,000 per year. The Insurer paid $50,000 to defend

the case before settling for $237,500.


A company doing business in the United States, was sued by a former employee. The plaintiff alleged that he was hired to be the VP of Sales and Marketing and entered into a written contract for such a position. He claimed that items which were promised to him were taken away (i.e., secretary, car allowance, staff levels, etc.) and that he was wrongfully terminated in 2003 when he allegedly failed

to meet sales targets. The plaintiff brought various breach of contract claims seeking to

recover contractual benefits, punitive damages, interest and fees. After numerous failed

mediations, the matter settled for $200,000 with $65,000 spent on the defense.


Why You Need It?

• The cost of claims and the duration of employment disputes are rising

• Defense costs can range from $200,000-300,000

• Timeline for resolution of employment litigation: 18-24 months

• Timeline for dispute resolution: 12 months

• Most Common Charge is Retaliation (I complained about sexual harassment and got fired).

A plan to significantly increase or decrease workforce in the coming year causes EPL Risk to Increase

• Average total cost of EPL Lawsuits $70,267


What is the cost?

Many insuers offer EPL coverage within Commercial Packages or Busines Owner’s Pacakge typically $500,000 worth of coverage with a $2,500 - $10,000 deductible can be purchased for about $1,000 annually. While, a $1,000,000+ limit of coverage can vary from $1,500 -$25,000+ depending on a company’s employee count, location, policy deductible and claim history. EPL is often included in Management Liability insurance programs alongside Fiduciary liability & Directors & Officer’s Liability. It can also be purchased it a standalone policy.


I typically start recommending companies to look into EPL coverage if they have more than 10 or so employees, especially if they are based in a high-tech competitive area like California or Boston.

Feel free to reach out with any EPL related questions you may have.


Sources:

http://www.chubb.com/businesses/csi/chubb12192.pdf

https://www.advisenltd.com/wp-content/uploads/complete-picture-spotlight-epli-market-whitepaper-2014-10-2.pdf


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