Employment Practices Liability
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If you have employees, your business can’t afford to be without employment practices liability coverage.
HR Morning, which is a news website for human resources professionals, reports that the average EPLI settlement is $125,000.
If the case goes to court and a judgment is awarded, the average increases to $200,000. Even then, 25 percent of judgments awarded are for amounts greater than $500,000. These numbers do not include legal fees, which are also covered by your EPLI coverage.
Even if you go to court and are absolved of wrongdoing in the matter, the legal costs remain. Your EPLI insurance will cover those costs even in nuisance suits.
The costs involved in EPLI lawsuits can be astronomical before legal fees come into the picture. Your EPLI coverage should cover all of this up to the covered amount.
What is EPLI Insurance?
When employees, former employees, or applicants who were denied employment sue your business over issues related to their employment, or lack thereof, your general liability insurance does come into play. This isn’t the kind of liability protection that policy offers.
You need employment practices liability coverage to help you cover the legal costs, settlements, and judgments against your business when you are accused of discrimination and other similar charges.
What Does Your Employment Practices Liability Insurance Cover?
EPLI protection is effective in a variety of discrimination accusations made against your business. Whether it has merit or not, an employment lawsuit can disrupt your business and cost you plenty of time, money, and mental resources to defend against.
These are some of the types of claims EPLI protects your business against:
Libel or slander/defamation
Hostile work environment
Invasion of privacy
Negligent hiring practices
Failure to hire or to promote
Breach of contract
Violations of the Family and Medical Leave Act
Breach of employment contract
Deprivation of career opportunities
Violations of civil rights laws
Plus many more
Different insurance providers offer different specific coverages and exclusions. It’s important to work with a trusted independent insurance agency that can help you evaluate the unique risks your business faces.
Because policies vary so greatly, it is important to make sure you understand exactly what you’re getting when you purchase EPLI coverage. That way you’re not left with some unpleasant surprises along the way.
Three Important Details to Learn When Buying EPLI Coverage:
1. EPLI is a claims-made type of policy. Policies may cover all the possible claims mentioned above, or they may only cover some of them. You need to understand what your policy protects your business against.
2. Most EPLI policies have specific exclusions. The following are some violations commonly excluded from EPLI coverage:
Occupational Safety and Health Act (OSHA) violations
Failure to comply with workers compensation laws
Fair Labor Standards Act violations
Consolidated Omnibus Budget Reconciliation Act (COBRA) violations
Worker Adjustment and Retraining Notification (WARN) Act violations
Employment Retirement Income Security Act (ERISA) violations
There are other things your policy may expressly exclude as well. We will work with you to make sure you understand the protection and exclusions your coverage provides when comparing EPLI policies.
3 . Most EPLI policies have limits and deductibles. Both the limits of your policy and your deductible help to determine how much you will end up paying for covered events with your EPLI policy. Your deductible is your expected contribution.
The higher the deductible, the lower your policy will be. Insurance providers view that as your shared risk and reward you with reduced rates.
The policy limit is the maximum amount of payout the policy offers. Some policies have limits for each event as well as a lifetime limit. Some businesses face greater risks of employment lawsuits, nuisance or otherwise, than others.
You need to work with an insurance agency that understands your risks and will help you choose the policy that best protects your business needs.
Determining EPLI Insurance Costs
A variety of factors determines EPLI costs. Insurance providers are experts when it comes to assessing risk. Some businesses represent greater risks than others for employment practices claims and lawsuits. The following may be taken into consideration when deciding the costs of policies available to your business:
The size of your business.
The number of employees your business has.
Employee turnover rates.
History of claims made against your business.
Your companies written policies regarding hiring, firing, promoting, and discipline.
Other factors may come into play as well, but these are some of the key details insurers use to determine the premiums for your EPLI policies.
Tips to Reduce Your Risk of Employee Lawsuits
If you want to effectively lower your EPLI costs while reducing your risks of being targeted by employment lawsuits, prevention is the method you want to take. The following actions can help you prevent your business from becoming the target of lawsuits related to employment practices.
Conduct background checks on all potential candidates.
Create a handbook that illustrates the policies and procedures of your business and the expectations you have of your employees.
Conduct routine performance reviews of all employees and document the results in each employee’s file.
Clearly define the job role, responsibilities, performance requirements, necessary skills, and expectations for each position within your organization.
Establish a zero-tolerance policy (in writing and practice) concerning discrimination, harassment, substance abuse, etc.
Document all employee issues accurately, thoroughly, and immediately. Also, document the company’s actions to resolve the issue.
Document the decision-making process about all decisions related to hiring, firing, and promoting employees.
Establish an open-door policy that allows each employee to know he or she can report employment issues without fear of being punished.
Make sure the application process ensures equal opportunities for all and leaves no room for indications that discrimination based on age, race, religion, gender, or anything other than merit and potential appears on the application.
Develop a screening process to rule out people who are not good fits for your organization before the interview process when possible.
Taking every possible step to avoid employment practices lawsuits will not prevent them all. When prevention isn’t possible, it pays to have a solid EPLI policy to protect you.
Choose BHI Insurance Associates for Your EPLI Coverage Needs
Here at BHI Insurance Associates, we have served New Jersey homes and businesses for more than 50 years. As an independent insurance agency, we have worked hard to earn a reputation for honesty, integrity, and offering the right balance of coverage, costs, and risk aversion.
We believe these are the most important things we have to offer the businesses who trust us to help them protect their interests with insurance, including EPLI coverage.