EPLI is a type of insurance coverage addressing liabilities
arising from wrongful acts involving employees.
These acts can range from sexual harassment to discrimination, wrongful
termination, failure to promote, creating a hostile work environment, etc. It has always been a good idea to at least
seriously entertain this coverage, if not carry it.
The main catalyst for me writing this post is that I’ve
realized in recent months that many business owners not only don’t carry EPLI,
they have never heard of it. I have seen
first-hand over the years where not having an EPLI policy in place has caused
significant financial damage to businesses.
It’s a different time in our society where injustices are not tolerated
as they may have been decades ago. These
changes have been occurring long before the “Me Too Movement”,
however that movement has put a brighter spotlight particularly on sexual
harassment in the American workplace (not just Hollywood and Harvey Weinstein) over the
past year. With these societal
developments occurring, it has become increasingly important (it was always important) to
train your workforce on a regular basis such that a person doesn’t have to be a
victim to any of the circumstances which could give rise to a claim. Secondarily, even if you have systems in
place they could fail and that is when an EPLI policy could be effective in
preventing significant financial harm to your business.
One area that has hurt many businesses are wage and hour claims. The legal profession is aggressive in pursuing these claims and they can reach into the seven figures when they assemble a class of employees to join the lawsuit. EPLI policies do not protect against wage and hour claims and you cannot bind coverage that would cover monetary judgments in this area. You can, however, add coverage that will provide for the legal costs incurred against defending these claims. Generally the amounts covered will be up to $100,000 and covers the defense costs only for wage and hour claims including meal, rest period and overtime. As mentioned before, class action lawsuits are generally pursued and you must consult with your broker to determine whether there is a "multiple claim or class action exclusion" on the policy.
Once you've made the decision to carry EPLI, making the best decisions surrounding deductible levels, amount of coverage, etc. are important as it is with any insurance policy. One difference with EPLI coverage is that, with most standard policies, the amount of legal defense costs incurred goes against (i.e. reduces) the coverage amount. With general liability policies this isn't the case, so that will be a factor and an important part of the discussion with your broker regarding coverage amounts.
One area that has hurt many businesses are wage and hour claims. The legal profession is aggressive in pursuing these claims and they can reach into the seven figures when they assemble a class of employees to join the lawsuit. EPLI policies do not protect against wage and hour claims and you cannot bind coverage that would cover monetary judgments in this area. You can, however, add coverage that will provide for the legal costs incurred against defending these claims. Generally the amounts covered will be up to $100,000 and covers the defense costs only for wage and hour claims including meal, rest period and overtime. As mentioned before, class action lawsuits are generally pursued and you must consult with your broker to determine whether there is a "multiple claim or class action exclusion" on the policy.
Once you've made the decision to carry EPLI, making the best decisions surrounding deductible levels, amount of coverage, etc. are important as it is with any insurance policy. One difference with EPLI coverage is that, with most standard policies, the amount of legal defense costs incurred goes against (i.e. reduces) the coverage amount. With general liability policies this isn't the case, so that will be a factor and an important part of the discussion with your broker regarding coverage amounts.
In addition to reviewing EPLI options with your broker, I strongly recommend that if you don’t have a strong HR team in-house, you connect with an outsourced provider. The maze of employment law rules and regulations is vast, and if you don’t pay attention to the details it could end up costing you and your business in a variety of ways. Many small to medium sized businesses do not have in-house HR professionals but that doesn’t mean that function can be ignored. There are providers out there who will take on all of your HR needs or if you have some functions covered internally, you can choose from a menu of services to complement what you already have in place. Having the HR function properly covered by the right professional(s) can mitigate the risk of having an employment claim made. As a backup, EPLI is a very good coverage to have in place.
An ounce of prevention is worth a pound of cure as the old
saying goes. Properly, and regularly,
training your workforce with human resources professionals is vital in
succeeding in today’s workplace environment.
With the right HR professionals on your team, you can not only
potentially avoid having an employment claim made against your business, you
can also learn how to get the most out of your workforce while your employees
also get the most out of your organization in their journey to continuous
professional growth and development.
It’s a win-win scenario when done correctly, and can also have many
other positive effects on your business including cultivating built-in
succession planning, for example, as employee retention (including key employee) increases within a good
workplace. Employees who are happy in
their work environment will produce better quality results which should be
evident in the bottom line. At the end
of the day we are all in the people business, be sure to treat your people
well and have the right HR team in place to help with that initiative.
If you are interested in obtaining the right professional resources to help you with your business lines of insurance (including EPLI) or HR professionals, let me know.
If you are interested in obtaining the right professional resources to help you with your business lines of insurance (including EPLI) or HR professionals, let me know.
