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Complete Guide to EPLI Insurance

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EPLI insurance

According to the Equal Employment Opportunity Commission (EEOC), employees filed 72,675 cases alleging workplace discrimination in 2019.

Regardless of their outcome, these cases impose significant costs on employers. EPLI insurance protects your business from these costs.

So what is EPLI insurance? What does EPLI cover? When discussing EPLI coverage, who needs it?

Find answers to these questions and more in this comprehensive guide.

What Is EPLI Coverage?

As you begin learning about EPLI, your first question might be, “What does EPLI stand for?”

EPLI insurance coverage is also called employment practices liability insurance. It covers companies against claims workers make regarding their legal rights as employees.

EPLI insurance policies can take different forms depending on a company’s size. Larger companies often choose stand-alone EPLI coverage. Meanwhile, smaller businesses may secure EPLI coverage as an endorsement to their business owner’s policy (BOP).

What Types of Situations Will EPLI Protect Against?

Employees and prospective employees have certain rights under federal, state, and local laws. EPLI protects companies against claims that these rights were violated.

Situations Involving Workplace Rights Enforced by the EEOC

The EEOC protects the most basic rights of all employees and job candidates if an individual files a claim with the EEOC, EPLI insurance protects your company.

Harassment and Discrimination

Under EEOC protections, employees have a right, first, not to be harassed or discriminated against based on certain factors. These include:

  • Race or national origin
  • Color
  • Sex, including sexual orientation, gender identity, and pregnancy
  • Religion
  • Disability
  • Age
  • Genetic information or family medical history

Sexual harassment claims are among the most common situations involving alleged violations of employee rights. Wrongful termination and failure to promote likewise fall under this category of EEOC-protected rights.

Take, for example, an employee with documented anxiety and an employee who does not have a diagnosed mental illness.

The two men hold similar sales positions. Both perform well in their current positions. However, the disabled employee has a higher sales win rate. He also holds a degree in sales management, while the other employee does not.

If the company promotes the non-disabled employee, the disabled employee could claim discrimination. In this case, an EPLI policy protects the company from the litigation that follows.

Importantly, workplace protections also cover prospective employers.

Perhaps the two men vying for the sales management position in the above example were potential new hires. A similar scenario to the one above played out. The company hired a non-disabled employee. Once again, the candidate who was not hired could claim discrimination. And once again, EPLI coverage protects the company.

Compensation

The EEOC also protects employees’ right to receive equal pay for equal work. Situations involving employee compensation claims also fall under EPLI insurance policies.

For example, a woman and a man might perform the same job and have the same qualifications. However, the female worker’s pay might not be commensurate. If this is the case, she could claim that her rights were violated.

EPLI coverage insures her company against the legal fees, judgments, and settlements that result.

Workplace Conditions

In addition to compensation, EEOC protections also govern the conditions under which work is performed.

Some employees require accommodations to perform their jobs. These accommodations can address needs that arise from medical conditions, disabilities, or religious beliefs. Common accommodations include flexible scheduling, voluntary shift swaps, or reassignments.

For example, Muslims celebrate the end of Ramadan with Eid-al-Fitr. A Muslim woman might request this holiday off. If her company denies her request without demonstrating that the request posed an undue hardship, the employee could file a claim.

As in the cases above, EPLI insurance protects the company from the litigation that follows.

Data Protection

Employees also have the right to expect that their employers will keep personal information confidential. This includes medical and genetic information.

In the event of a data breach, for example, an employee could pursue litigation. Again, an employment practices liability policy protects your company.

Retaliation

Finally, employees have the right to report discrimination and other violations of their rights. They can, moreover, pursue investigation and litigation in such cases. Importantly, federal law protects employees from retaliation when they raise such claims.

Thus, any of the employees in the above hypothetical examples would be protected from retaliation if they pursued their cases.

Perhaps the Muslim woman above decided to file a claim with the EEOC. Shortly thereafter, her company reassigned her to an unfavorable nightshift despite her seniority over other employees who remained on days. In this case, the woman could claim retaliation and pursue additional litigation.

Situations Involving Workplace Rights Not Governed by the EEOC

Besides EEOC protections, additional federal, state, and local statutes also govern employee rights. These protections range from federal and state laws to executive orders.

For example, federal contractors and subcontractors are governed by Executive Order 11246. This order mandates that contractors take affirmative action to offer equal opportunities for employment. Contractors’ obligations under this order include developing a written affirmative action plan (AAP).

If a federal contractor fails to fulfill these mandates, the Office of Federal Contractor Compliance Programs (OFCCP) can take action. EPLI insurance can protect contractors from the costly litigation that follows.

Employers in the civil service sector face additional mandates. The Civil Service Reform Act of 1978 (CSRA) lists other protections beyond the EEOC protections above. For example, the CSRA protects employees from discrimination based on marital status or political ideology. It also protects federal whistleblowers. The Office of Personnel Management (OPM) enforces these protections.

In addition to these examples, other workplace regulations can give rise to situations requiring EPL insurance coverage. These include but are not limited to:

  • Title IV of the Civil Rights Act of 1964
  • The Immigration and Nationality Act
  • Title II and III of the Americans with Disabilities Act
  • The Age Discrimination in Employment Act
  • The Family and Medical Leave Act
  • The Fair Labor Standards Act and the National Labor Relations Act
  • Sections 503, 504, and 508 of the Rehabilitation Act
  • Title I of the Genetic Information Nondiscrimination Act

What Does Employment Practices Liability Insurance Cover?

In each of the above situations involving alleged violations of employee rights, employment practices liability coverage protects the employer. So what is EPLI “coverage”? Exactly what does EPLI insurance cover?

First, EPLI insurance policies cover the legal costs of defending a lawsuit in court. They also cover judgments and settlements.

Importantly, EPLI insurance policies offer this coverage regardless of how the case is decided. Win or lose, your EPLI policy will cover your legal fees.

It’s equally important to understand, however, what EPLI claims do not cover. EPLI insurance usually will not reimburse your company for punitive damages. It also does not typically cover civil or criminal fines.

Furthermore, EPLI insurance policies exclude liabilities covered by other types of insurance. For example, workers’ compensation policies cover expenses that result from on-the-job injuries. Therefore, a company could not make EPLI claims for situations involving workers’ compensation.

What Protection Does EPLI Provide Against Many Kinds of Employee Lawsuits?

Like any policy, EPLI insurance includes limitations. Understanding these limitations and securing additional policies to cover them is important. Equally important, though, is understanding the incredible versatility EPLI coverage offers.

Situations involving alleged violations of workers’ rights fall under EPLI coverage. In addition to the hypothetical examples above, the following are common types of employee lawsuits:

  • Sexual harassment
  • Discrimination
  • Breach of contract
  • Negligence in employee evaluations
  • Wrongful discipline or termination
  • Failure to employ or promote
  • Deprivation of career opportunities
  • Emotional distress
  • Mismanagement of employee benefit plans

Once again, it is important to note that workers’ rights protections extend to prospective workers. EPLI insurance is versatile enough to cover situations involving current, former, and prospective employees.

While versatile, EPLI insurance typically operates on a claims-made basis. In other words, to qualify for EPLI coverage, the claim must be made during the coverage period. Unfortunately for companies, many employment-related claims arise months or years after an alleged incident. This highlights the necessity of maintaining EPLI coverage and purchasing tail coverage for the time after a policy expires.

Why Do Businesses Need EPLI Insurance?

An understanding of the versatility of EPLI insurance highlights its value for a diverse range of employers.

EPLI insurance is valuable and necessary for both large and small companies and for public and private companies.

By virtue of their size, large companies experience workplace lawsuits more frequently. However, the frequency with which they face litigation means that most large companies have taken steps to protect themselves. Most large corporations understand the benefits of EPLI and have policies in place.

In contrast, new or small businesses are more vulnerable. They don’t experience lawsuits as frequently. Consequently, many small businesses let down their guard. They assume that not having been the target of a lawsuit means that they won’t be the target of a lawsuit. Unfortunately, this strategy is incredibly risky.

In fact, even companies with a single employee can be the target of workplace discrimination claims. No matter how frequently they happen, employee discrimination claims are costly. These costs include not only defense costs but also costs associated with lost productivity. In addition, companies targeted by workplace lawsuits incur reputational costs.

For companies that aren’t prepared, moreover, these costs are significantly higher.

Preparation entails cultivating a strong legal department. It also involves conducting internal training and audits regarding diversity. Furthermore, it entails developing a detailed employee handbook. This handbook outlines policies regarding hiring, advancement, discipline, and termination. In workplace claims and internal audits, this handbook can be a valuable point of reference.

In addition to any preventative internal steps, however, preparation must always include purchasing EPLI insurance.

What Happens If I’m Sued By An Employee?

So what happens if an employee makes a claim alleging that you’ve violated their rights? If you’ve already secured EPLI insurance, you can rely on that protection. However, it’s important that you take additional steps to protect yourself throughout the proceedings.

Seek Legal Assistance

First, it’s essential to contact an experienced business attorney.

In some cases, an experienced attorney can identify errors in the lawsuit that can lead to its dismissal.

If the filing is in order, and the case moves forward, your attorney can help you review the allegations. He or she will also advise you to put a litigation hold in place. This hold, or preservation order, requires the company to maintain all data related to the lawsuit.

Your attorney will also advise you to avoid contact with the plaintiff. This advice is crucial and can protect you from additional litigation alleging retaliation.

At all points of the process, in fact, be sure that your attorney’s advice—rather than your own emotions—guides your actions.

Contact Your Insurance Provider

Next, notify your insurance provider that a complaint has been filed. Most policies require prompt notification to preserve coverage.

Your provider will guide you through the process of making an EPLI claim. If the claim is covered, the provider or its appointed counsel will defend your case. Your policy will also cover the costs of defending the lawsuit or settling out of court.

Work with Counsel to Respond to the Suit

Different states establish different deadlines for responding to workplace lawsuits. In most cases, you’ll need to respond in writing within 30 days of being served. Failing to respond by this deadline can result in the plaintiff winning by default.

Your initial written response must include the following:

  • Admission or denial of each allegation
  • Your defense and any counterclaims against the plaintiff or other parties
  • Your intention to seek a jury trial or an out-of-court settlement

Your lawyer will help you respond by evaluating the case and all relevant factors. Perhaps your lawyer can identify one or more strong counterclaims. In this case, proceeding to trial might be advisable. On the other hand, perhaps the plaintiff has indicated a willingness to accept a non-monetary resolution. In this case, your lawyer might advise settling out of court.

Because litigation is costly, the extent of coverage your EPLI insurance policy provides is another factor. Having a strong EPLI insurance policy allows you to consider the full range of possible responses to an employee lawsuit.

You’re Required to Protect Your Employees’ Rights—You Can Choose to Let Your EPLI Insurance Policy Protect Yours

By seeking more information about EPLI insurance, you’ve taken the first step toward protecting your company from workplace lawsuits. Now that you know more about EPLI insurance, the next step is purchasing an EPLI policy.

Count on the experts at LoPriore Insurance Agency, Inc. to help you develop a business insurance plan that meets your needs. Check out our blog or contact us for more information. You can also request a quote online.

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