If you own a business and have employees, you need Employment Practices Liability Insurance. This insurance coverage typically complements or is part of your Directors and Officers Liability Insurance. Basically, Employment Practices Liability Insurance protects you, your company officers and your company in suits relating to employment practices.

Claims of discrimination and harassment are more common than you would think. When you are hiring, you may find that a marginally qualified candidate with physical disabilities may take offense that you hired someone else. The implication is that your company violated the candidate’s civil rights under the Americans with Disabilities Act. You may find yourself in court even if you followed the letter of the law.

Perhaps a middle level manager was accused of sexual harassment by someone she supervises. Even if the accusations are baseless, your company may have to deal with an expensive, time consuming court case. Possibly, your company may even have to settle. Liability Insurance for Employment Practices covers your legal defense and any settlement.

This Liability insurance pays for legal defense when law suits are brought against your company for employee hiring, discipline or firing practices. Commonly the insurance policy will require your company to select a lawyer from an approved list, much like a Preferred Provider Organization list on your medical policy.

If you have a large number of employees, you know it can be difficult to track the hours they work. An employee could easily claim they worked hours that they weren’t paid for. Wage and Hour claims have a way of becoming contagious. If one employee starts a suit, you may, before long, have half your staff on the other side of the courtroom. Again, Liability Insurance for Employment Practices covers your expenses when other policies specifically do not cover wage and hour claims under the Federal Labor Standards Act.

New technology has also created a wide variety of employee privacy concerns. Do you want to be a test case, getting sued by an employee because you read their Facebook page? What if you fire an employee for using Twitter to slander your company? What if someone is writing tainted reviews on Yelp? These are all huge grey areas in the law. The legal costs associated with being involved in the cases that define new rules can be excruciatingly expensive. And again this Liability Insurance covers your expenses.

Of course carrying Liability Insurance for Employment Practices does not provide carte blanche in hiring and firing. Your company still should have in place guidelines for employing new hires as well as letting go of employees when the need arises. These guidelines should specifically follow rules from the Employee Retirement Security Act, the National Labor Relations Act, the Worker Adjustment and Retaining Notification Act, and the Consolidated Omnibus Budget Reconciliation Act health benefit provisions. Being able to produce documented guidelines can reduce your exposure to liability. The guidelines don’t prevent you from being sued.

Protect your business and its principal officers. Talk to your insurance agent about adding Employment Practices Liability Insurance today.

Employment practices claims have become one of the fastest rising and most devastating accusations an employer can face. Even if the accusations are false and ultimately dismissed, the cost of defending a business in court can run into several thousands of dollars. Should the allegation prove true, employers not only face the cost of defense and litigation, but court fees, awards, and in many cases, punitive damages. Coverage for liability in employment practices claims has become essential. A sensible and cost effective way to protect a company, and employees, is with Employment Practice Liability Insurance (EPLI).

What is EPLI?

EPLI is an insurance policy dedicated to protecting employers against suits alleging wrongful termination, sexual harassment, discrimination, and workplace torts like defamation, invasion of privacy, and infliction of emotional distress.

Employment Practices Liability Insurance is commonly written either on a stand-alone basis or as a rider for all of the common employer’s policies, including directors and officers, employers liability, and comprehensive general liability. In general, these policies offer broad coverage of the sorts of claims now usual in wrongful termination or employment discrimination cases.

The policy is written on a claims-made basis with defense costs within its limits. Coverage is triggered by a lawsuit, an administrative proceeding, or a written claim of discrimination, sexual harassment, or wrongful termination. There are often exclusions for punitive damages, contract claims, company downsizing or plant closures, and intentional acts.

What are Pertinent Issues in Policy Evaluation?

Stand-alone EPLI policies are not standard, and terms and conditions for these policies can vary substantially. An employer considering a stand-alone employment-practice policy should consult a professional insurance agent or broker for a thorough analysis of the employer’s exposures and analysis of the terms and conditions contained in various policies. Some pertinent issues to consider when evaluating stand-alone EPLI policies include the following:

1. Limits, Deductibles, and Coinsurance. Limits and deductibles are largely a function of the specific requirements of the insured. Although a typical policy provides a $1 million limit of liability per claim and a $1 million limit of liability for each policy, limits of $50 million or $100 million are also available. Small to midsize employers can often find policies with deductibles as low as $2,500 to $5,000, whereas large employers are likely to benefit from the pricing advantages of deductibles that can range from $50,000 to $250,000.

2. Insureds. The insured can vary from policy to policy, and one of the benefits of stand-alone policies is a broad range of insureds. Policies with a broad range of insureds include the corporate entity, partners (in the case of partnerships), directors and officers, stockholders (to the extent of their liability), and employees, including present, former, prospective, temporary, and leased employees. Some policies allow volunteers and independent contractors to be considered as employees with respect to employment practices liability.

3. Pay on Behalf & Duty to Defend. The policy should pay defense expense and damages on behalf of the insured rather than to indemnify the insured. Paying damages and being indemnified by the insurer subjects the insured to a hardship that can easily be avoided. Duty to defend policies requires the insurer to defend the insured even if the allegations are groundless, false, or fraudulent.

Virtually all employers have exposure to employment practices litigation. Today, they also have access to a legitimate and valuable insurance product to cover that exposure. Employment Practices Liability Insurance is a prudent if not imperative purchase for all employers to consider.