5 reasons your business needs employment practices liability insurance

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Employment Practices Liability (EPL) insurance provides coverage for your company or small business against claims made by employees that their legal rights have been violated in some way.

EPL policies protect employers against claims like sexual harassment, wrongful termination, and similar claims.

Here are the top five causes of EPL claims:

Sexual Harassment

In the #MeToo age, it’s become common to see accusations of wrong doing thrown about on social media. But an actual lawsuit alleging sexual harassment can be incredibly difficult for every party involved. An EPL policy will cover legal costs, whether your business wins or loses the suit.

Sexual harassment claims are disturbingly common. The EEOC reports that in 2017, it received 91,500 claims overall, and nearly 30 percent included an accusation of sexual harassment. With these types of claims on the rise, employers of all sizes have decided EPL policies are one way to protect themselves against these claims.

Even if you, as the decision maker, do not intend to harass anyone, you may not be able to control your other supervisors actions. Also, disgruntled employees (or former employees) can simply make the accusation and send you into a legal tailspin.



A diverse and inclusive workplace makes room for people of different genders, races, faiths, and sexual orientations, but sometimes an employee will bring a claim of discrimination against an employer. The EEOC recognizes 11 different types of employment practices discrimination: disability, genetic information, national origin, religion, retaliation, sex, sexual harassment, race or color, age, equal pay/compensation, and pregnancy.

This kind of alleged discrimination can be described in various ways, too, including “wrongful termination,” “wrongful discipline,” “deprivation of career opportunity” and “failure to employ or promote.”

The claimants in these allegations can be a current employee, former employee or prospective employee.


Negligent Evaluation

A negligent evaluation claim is when an employee alleges that their performance evaluation was excessively negative. These claims may allege that the employer or manager gave the employee unfairly low marks and/or were generally inaccurate.

A negligent evaluation claim can often be part of the building blocks of a discrimination claim.


Wrongful Infliction of Emotional Distress

As fun as it can sometimes be to poke fun at millennials or “snowflakes,” a claim of wrongful infliction of emotional distress is no laughing matter. If the management in your company does something really terrible to a claimant, they can sue for the infliction of emotional distress, and recover damages for emotional pain and suffering. If the claimant’s distress causes illness or some other physical malady, then that employee can also potentially recover damages for that, as well.


The Best Defense

While an EPL policy can help protect your business in situations like these, employers should focus on preventing or minimizing these issues beforehand.

Employers can address these issues in several ways:

  • Implement an effective screening process to help avoid discrimination in hiring and termination practices.
  • Inform employees of steps to take if they believe they are the object of sexual harassment or discrimination. Make sure supervisors and managers understand what behaviors are not permitted.
  • Publicly post company policies on harassment and discrimination in common areas of the workplace. Make sure the employee handbook highlights those policies.
  • Consult your attorney and call them whenever you have question. A good attorney is worth her weight in gold to help you craft proper risk management procedures around employment laws.

To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place. The Insurance Information Institute recommends the following actions in order to address potential issues:

  • Avoid discrimination in hiring by creating effective hiring and screening programs.
  • Make corporate policies clear by posting them throughout the workplace and including them in employee handbooks. If you have an employee intranet, post them there.
  • Educate employees on the steps they should take if they are subjected to harassment or discrimination, and make sure everyone (but especially managers) knows where the company stands on these behaviors.
  • Document everything, including what your company is doing to prevent and solve employee disputes.
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