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EPLI Insurance: Does Your Business Need It?

EPLI insurance is in the spotlight these days.

The reason why, of course, is the #MeToo movement sweeping the world, which has leveled some of the most powerful men in media, news, and other industries. The newfound, and long overdue, mindfulness of abuse and sexual assault and harassment in the workplace has irrevocably changed how business is done in America. No longer can organizations ignore what their own employees—or executives—are doing in private or on company property. Entire cultures and policies are changing to adapt to the reality of office misconduct.

One of the ways they’re adjusting is through EPLI coverage, or Employment Practices Liability Insurance. According to the Washington Post, as of late 2017, 41 percent of companies with more than 1000 employees and 33.3 percent of companies with over 500 employees have purchased EPLI coverage to protect against claims of sexual harassment. In the same article, it’s revealed U.S. companies have spent around $2.2 billion on insurance policies regarding sexual harassment, racial discrimination and unfair-dismissal accusations. According to research firm MarketStance, the market for EPLI insurance is projected to grow to $2.7 billion by 2019, or by over 50 percent in the next year. Clearly, EPLI coverage is in the spotlight.

But what exactly does it cover?

Employment Practices Liability Insurance protects employers from lawsuits brought on by employees, former employees, and potential employees who allege discrimination, harassment, wrongful termination, and other employment-related issues such as breach of employment contracts, invasion of privacy, and defamation. It provides coverage for situations that general liability insurance does not.

Employment lawsuits can be extremely expensive for small- and medium-sized businesses to settle and litigate. For example, in wrongful termination cases, former employees can sue for back pay, or their whole salary, which would be cost-prohibitive. Even in cases when the allegations of harassment or retaliation have no merit, defense costs, verdicts, and settlements can reach as high as six or seven figures.

According to the 2017 Hiscox Guide to Employee Lawsuits, the average cost for claims that resulted in defense and settlement payments was $160,000, up from $125,000 in 2015. That could be incredibly damaging for a small or mid-size company. Can your company afford a $160,000 lawsuit without insurance coverage? Or a lawsuit double that amount?

Note that every employer, big or small, is susceptible to legal action employees, current, past, present, or potential. In addition to EPLI coverage, one way to nip the prospect of litigation in the bud is to educate and train managers and their team members in the ways of sexual harassment and discrimination prevention. In fact, some jurisdictions require it while others are heavily considering it. Employers should review local and state requirements for training, and immerse their employees in sexual harassment, racial discrimination, and unconscious bias training. Along with a comprehensive EPLI insurance coverage package, companies can consider investing in employee sensitivity training to ensure these types of incidents go away for good.  

For questions about how EPLI coverage can help protect your company, give us a call.

Dominic Piccirillo