Employment Practices Liability Insurance (EPLI)

Employment liability claims made under common law (i.e., law based on judicial decisions, as opposed to statutes) typically arise from one of the following five broad categories of conduct:

• Discrimination, based on age, race, gender and other factors.
• Wrongful termination - including constructive discharge, in which an employee resigns as a result of the employer creating a hostile work environment; and retaliatory discharge, in which an employee is fired as punishment for engaging in a legally protected activity.
• Sexual harassment (although legally, sexual harassment is a form of discrimination)
• Breach of employment contract.
• Infliction of emotional distress or mental anguish.
• Failure to employ or promote.
• Wrongful discipline or demotion.
• Mismanagement of employee benefits.
• Defamation.
• Privacy violations.
• Violation of the Family Medical Leave Act or other such laws.
• Retaliation, and Inappropriate employment conduct (also sometimes referred to as "miscellaneous workplace torts"), a "catchall" term that includes but is not limited to such perils as constructive discharge, invasion of privacy, failure to promote, and defamation

While EPLI covers many areas of employment risk, most policies have certain exclusions, such as violations of the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, Occupational Safety and Health Act (OSHA), and the Employee Retirement Income Security Act (ERISA), as well as claims arising under workers compensation laws. EPLI also will not cover punitive damages or claims resulting from criminal acts. Privacy violations caused by a computer breach also may not be covered by EPLI.

Defense provisions in EPLI policies may also vary. EPLI policies can be written with two types of defense provisions: a "duty to defend" provision places responsibility for managing defense claims with insurers; and a "non-duty to defend" provision assigns responsibility to the insured. Be sure to discuss these details with your insurance professional.

Most EPLI policies are written on a claims-made basis, meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid. The forms contain "shrinking limits" provisions, meaning that insurer payment of defense costs - which are often a substantial part of a claim - reduce the policy's limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits.

Employment practices liability is generally NOT covered by general liability insurance, but can be purchased as a stand-alone policy or added as an endorsement to a Business Owners Policy or Commercial Package Policy. Bear in mind that EPLI coverage may have more limits and exclusions as part of a package policy.