Employment Practices Liability Insurance (EPL) is intended to cover four major perils: harassment, discrimination, wrongful termination, and workplace torts. Allegations of this type are typically excluded under both general liability and workers compensation policies.
- Discrimination claims are often based on failure to hire, failure to promote, unjust demotion, and discriminatory slurs or comments
- According to the EEOC, charges of employer retaliation, racial, age and gender bias and discrimination due to a disability are most common
- Wrongful termination is the act of terminating an employee in a manner that is against the law.
- Harassment – typically sexual, encompasses unwelcome sexual advances, requests for sexual favors, and verbal, visual and physical conduct of a sexual nature. Harassment can also be in the form of retaliatory actions meant to punish, segregate or shame.
- Workplace torts include allegations that do not fall within the categories of wrongful termination, sexual harassment and discrimination, and may include (but are not limited to) failure to grant tenure, invasion of privacy, negligent evaluation, and false imprisonment.
Employment practices liability policies are written on a claims-made and reported basis, and only cover claims that are made and reported during the policy period. In addition, they exclude any claims or claims circumstances of which you were aware or should have been aware at the time you obtained coverage.
The limit of liability is an aggregate limit for the policy term and will be reduced by any defense costs. Deductibles apply on a per claim basis and typically collected upfront to pay first dollar expenses.
Key exclusions found in an EPL policy include ADA compliance costs, strikes and lockouts, downsizing claims, retaliatory actions, claims by relatives, claims for non-pecuniary relief, claims for future pay, and claims from breach of an express employment contract. These are exclusions commonly found in most policies. Many policies are also excluding Wage and Hour claims or at best offer a small sublimit of coverage. Wage and Hour claims have been extremely prevalent in recent years.
In light of the recent Anti Sexual Harassment movement, it should be noted that while EPLI policies may provide defense of such claims, physical damages (in the case of rape/molestation) will most likely not be covered.
Your specific policy should be reviewed for additional or actual exclusions. Contact Us for help with your liability insurance.