What is Employment Practice Liability Insurance?

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Our society is becoming increasingly litigious.  The threat of a lawsuit hangs over every business transaction, large or small. Even employers who rigorously adhere to the letter of the law are likely to be sued at some point by an aggrieved employee or customer. While many suits are groundless, defending against them is costly and time consuming.

If you carry employment practices liability insurance (EPLI), your business has a measure of protection against lawsuits from current, prospective, or former employees who may allege “wrongful acts” such as discrimination, sexual harassment, or wrongful termination. But what happens if a customer sues you for discrimination? Are you protected?

What is the Importance of Third-party EPLI?

Many employers do not realize that they have a gap in their insurance coverage, leaving them vulnerable to discrimination and harassment lawsuits from customers, clients, vendors and suppliers. Standard EPLI policies only provide coverage for lawsuits brought about by employees or prospective employees.  Additionally, most commercial general liability (CGL) policies specifically exclude coverage for harassment and discrimination. That’s where third-party EPLI comes in.

Third-party EPLI fills this gap between EPLI and CGL. It offers protection against allegations of wrongful acts made by customers, clients, vendors and suppliers. In general, covered claims include the following:

  • Discrimination based on the following:
    • Race
    • Religion
    • Sex
    • Age
    • National origin
    • Disability
    • Pregnancy
    • Sexual orientation
  • The following forms of harassment:
    • Unwanted sexual advances
    • Unwanted requests for sexual favors
    • Other verbal or physical actions that create a hostile or offensive work environment

What are the two main reason for the rise in these claims?

  1. Increased national unemployment rate. This has a direct correlator to increased EPL claims. In times of hardship or desperation, individuals are exploring options to survive, including suing former employer(s), regardless if the claim is unfounded.
  2. The temperament of our current social environment. In today’s society, individuals have found their voice and the stage has been set. Again, many claims are legitimate, many are not. Regardless, it’s an unfortunate and jeopardizing circumstance requiring a formal, legal response from you.

One leading factor driving EPLI wins.

Your business can be held accountable for the actions and words of employees, contractors, representatives, patrons, customers, etc. If you are alleged of not addressing or handling an instance(s) of discrimination or harassment, you are responsible— especially in the eyes of attorneys or a jury. You can no longer say you did not know about EPLI coverage!

Who is EPLI Coverage for?

Third-party EPLI is vital for businesses that deal with customers daily. The risk of a claim exists, regardless of the industry. These claims arise within restaurants, medical spas, the construction industry and even in marijuana facilities. Even if your business doesn’t have a lot of interaction with the general public, you may still benefit from third-party EPLI coverage if your operations involve clients, suppliers or vendors.

A word from Insurance Advisor, Chris Sullivan…

“I’ve filed a handful of EPL claims in the past 2 months, which is more than I’ve filed in the past 2 years combined. Founded or not, these claims often settle due to debilitating defense costs, making settlement the most viable option. Outside of doing your best to manage this exposure yourself, you need to consider purchasing Employment Practices Liability Insurance.”

To learn more about third-party EPLI coverage and how POWERS Insurance & Risk Management can help protect your business, contact Chris Sullivan today at 314-333-4915.

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