What Is Employment Practices Liability Insurance (EPLI)?

Modern HR departments are in a position to make significant, lasting changes in the organizations they represent. This includes purchasing employment practices liability insurance. From how it works to limits and exclusions, find out how this coverage can protect your organization from financial harm.

What Is Employment Practices Liability Insurance?

Employment practices liability insurance (EPLI) is a type of financial safeguard that protects organizations from potentially harmful litigation and costs relating to personnel issues such as discrimination, harassment, and wrongful termination, among other claims. 

According to SHRM, EPLI protects against issues that “usually are not covered by general business liability insurance.” These policies also tend to exclude claims related to bodily injury and property damage. Likewise, actions related to federal labor laws are commonly excluded from EPLI claims, including: 

• COBRA violations
• ERISA violations
• WARN Act violations 
• NLRA breach of contract and claims 
• State unemployment insurance
• Workers’ comp statutes
• OSHA violations

Are Employers Required to Have Employment Practices Liability Insurance?

No, employers are not required to purchase EPLI. However, many businesses—particularly larger corporations, according to Nationwide—elect coverage as a precaution if they’re sued by current or former employees. 

As Nationwide puts it, the issue is that many small and new businesses “are often the most vulnerable to employment claims.” These organizations struggle to keep up without on-staff legal teams and appropriately updated employee handbooks.

How Much Does It Cost to Purchase Employment Practices Liability Insurance?

EPLI costs can vary depending on several different factors. These include: 

• The size of an organization’s staff
• Employee turnover rate
• Organization litigation history
• If an organization has pre-established employment rules and practices
• Policy limits
• The organization's industry

To learn more about EPLI costs for your organization, contact a trusted broker to get an estimate. 

How Can HR Limit the Risk of an EPLI Claim?

SHRM is clear that an EPLI policy isn’t supposed to replace secure employment practices, and even states that most insurance companies “will not insure a company unless it has some basic employment practices in place.”

So, what can HR do? Consider taking the following steps for the health of your organization: 

1. Ensure Your Employee Handbook is Up-to-Date: Do you have an employee handbook? If not, the BerniePortal blog has a go-to guide that details what to include, such as sexual harassment prevention statements and conduct standards. 
2. Implement or Update Investigation Practices for Incidents that Take Place: There’s a chance that your organization hasn’t updated these instructions in a long time, if ever. Change that. SHRM has excellent resources to help you get started. 
3. Develop Policies for Arbitration and Mediation: How do you settle issues that take place in the workplace? The more specific your policies and practices, the more protection you give your organization.