What is EPLI Insurance and why is it important? EPLI Insurance (Employer Practices Liability Insurance), provides coverage against claims stemming from employees and former employees allegations of Discrimination, Harassment, Retaliation, Wrongful Termination and Improper Workplace Conduct. This type of coverage is unique in that the risks mentioned are not picked up in other policies, not General Liability, not Errors and Omissions, not Directors and Officers. A lot of people will make the incorrect assumption that amongst those policies there is coverage for such risks, that can become an expensive mistake.
The risks to a company making such an incorrect assumption can be risky, and that risk is increasing. Claims related to EPLI have been and continue to be on the rise. According to the U.S. EEOC (Equal Employment Opportunity Commission), for 2017 the most common form of employment related charges is retaliation followed by discrimination based on race, sex or disability. Between these categories there have been over 122k claims made in FY 2017. Some other common forms discriminatory practices that can result in such a claim include religion, age and pregnancy.
In terms of the expense and time associated with an EPLI claim, the following information comes from The 2017 Hiscox Guide to Employee Lawsuits
A representative study of 1,214 closed claims reported by small to medium-sized enterprises (SMEs) with fewer than 500 employees showed that 24% of employment charges resulted in defense and settlement costs averaging a total of $160,000. On average, those matters took 318 days to resolve.
So what you have are claims that take a long time to settle, can cost hundreds of thousands of dollars and are covered by this specific type of insurance coverage. The short answer to the question of why is it important is pretty self explanatory, if a company doesn’t have EPLI coverage it would be looking at such claims resulting in defense costs and damages being paid by the company itself … maybe yours.
According to Chubb’s 2018 Top Risks for Private Companies in the U.S. more than one in four private companies reported experiencing an EPLI loss in the last three years. What’s interesting is that despite these numbers one-third of the respondents to the study have not purchased EPLI coverage.
What that says is that while the risks are prevalent, companies aren’t taking the steps they need. Why? The Chubb report goes on to say that one-third of non-buyers think it is covered by another form of insurance, nope.
So what are the benefits and why is it important? The benefit is coverage against some of the most prevalent forms of insurance claims made against companies today. As a broker I can tell you that a majority of the claims actions I see now are in the EPLI space. To be frank I explain EPLI exposures as a ‘when’ situation and not an ‘if’ to my clients and impress upon them the importance of getting it.
If this is something your company has considered implementing and could use some more guidance feel free to reach out with a call or an e-mail. I’ll be happy to act as a resource.
Business Insurance & Benefits Services of MA