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Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance

Get a quote on Employment Practices Liability Insurance

One of the most common sources of liability for small businesses is their own employees. From discrimination suits to sexual harassment claims, your company could be held labile for a host of workplace issues. Employment Practices Liability Insurance can help protect your company from these and other employee lawsuits.

What is Employment Practices Liability Insurance?

Employment Practices Liability Insurance (EPLI) provides financial protection for your business against lawsuits by current, past, or prospective employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues. EPLI can reimburse your business for the cost of defending a lawsuit in court, as well as any judgments and settlements against you. It covers legal costs whether you win or lose a lawsuit, but it does not cover any punitive damages or civil or criminal fines.


Employment Practices Liability Insurance can be added to a commercial general liability insurance policy or a business owner’s policy. It can also be written on a standalone basis.

Why do I need Employment Practices Liability Insurance?

According to recent research, three out of five employers will face an employment-related lawsuit at some point in time. Defending against these lawsuits, even if your business is cleared of any wrongdoing, can be distracting and costly.

For small businesses, in particular, the time and money spent to fight a lawsuit can be financially crippling. And although most people think of employees suing large employers when they think of discrimination lawsuits, in reality, small businesses are the most vulnerable to employment claims. Most small businesses lack a legal department, employee handbook, or other procedures to help reduce the risk of claims.

Many EPLI policies not only offer financial coverage, but they also provide add-on services to help mitigate the risk of employment-related claims. Some policies will offer consultation and HR assistance, which can assist small businesses who may have less experience with employment issues.

What does Employment Practices Liability Insurance cover?

An EPL policy covers your company as well as directors, officers, managers, employees, and former employees. EPLI covers claims filed by your current employees, former employees, and employment candidates whom you did not hire. Also, it typically covers claims from seasonal employees, leased employees, and independent contractors.

Employment Practices Liability Insurance covers a wide variety of wrongful actions in the workplace that may lead to employer liability, including:

Examples of EPLI Claims

Sexual Harassment

A woman claims that she was the victim of sexual harassment over a two-year period at her company. She presents evidence for her claim including specific incidences of harassment and her daily encounters with abusive language. The woman sues the company for damages.

Disability Discrimination

A job applicant who is unable to walk and uses a wheelchair is not hired for any of several positions at a retail store. The applicant is qualified for all the positions, but the store manager tells the applicant that he won’t hire anyone who uses a wheelchair. The applicant sues the company.

Racial Discrimination

Employees belonging to a racial minority feel they are being denied promotions at a regional restaurant chain due to their race. The employees file a class-action lawsuit against the employer.


An employee is injured at work and files a workers’ compensation claim against the company. The employee takes time to recover and returns to his job. However, a month after he returns to work, he is fired. He sues the company for retaliating against him for filing the claim.

What are the exclusions to Employment Practices Liability Insurance?

There are a number of common exclusions to Employment Practices Liability Insurance. These include:

How much does Employment Practices Liability Insurance cost?

AdvisorSmith found that the average cost of Employment Practices Liability Insurance for small businesses was $1,824 per year. This cost survey included small businesses with less than 20 employees and revenue under $500k, for coverage of $500k and a deductible of $2,500.

Pricing does, however, vary depending on a number of factors, including:

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer Employment Practices Liability Insurance:

ProviderEmployment Practices LiabilityGeneral LiabilityProfessional Liability

Is Employment Practices Liability the same as professional liability?

EPLI coverage is not the same as professional liability coverage, though they both protect your business in some way. Professional liability focuses on protecting individuals and companies from the costs of lawsuits and damages related to their professional advice and services. If a dissatisfied client brings a suit against you claiming negligence, poor performance, or any failing of your professional duties, Professional Liability Insurance would pay for any legal defense costs, judgements, or settlements. EPLI, on the other hand, protects your company if current, past, or prospective employees sue for alleged wrongful treatment.

What are other important conditions of EPLI?

Claims-made Basis

Employment Practices Liability Insurance is usually written on a claims-made basis. Claims against a policy are only valid if both the incident causing the claim as well as the reporting of a claim occur while the policy is still active. Once you cancel an EPLI policy, you no longer have coverage for actions that occurred while the policy was active.

It is especially important to be aware of the claims-made provision of EPLI coverage because employment claims sometimes may not be filed until months or years after an alleged incident. If your coverage is not continuous, you may not have coverage for events that occurred in the past.

Shrinking Limits

Employment Practices Liability Insurance features “shrinking limits” of insurance. This means the costs of legal defense reduces your limit of liability. For most general liability policies, legal fees are not counted towards your limit of liability. However, since legal fees account for a high proportion of the cost of EPLI claims, they are counted towards your insurance limits.


Employment Practices Liability Insurance usually includes a deductible. The deductible is the amount of each claim your business is responsible for before the insurance company’s coverage begins. This is a form of risk sharing and provides a financial incentive for your company to avoid claims. You can usually choose your deductible, and the higher the deductible, the lower your insurance premiums will be.

Reducing the Risk of an EPLI Claim

Although Employment Practices Liability Insurance can protect your business financially in the event of a lawsuit, there are steps you can take to reduce the risk of a lawsuit in the first place. Preventing lawsuits will lower your EPLI premiums and will also save you from the distractions of having to defend against employment-related lawsuits.

Some recommended steps to reduce your risks include:

Discrimination and Labor Laws

A number of federal laws have been enacted to prohibit different types of discrimination. Having some familiarity with the key anti-discrimination and labor laws will help your business reduce the chance of encountering an employment practices claim. Some of the key laws are:

Final Word

Employment Practices Liability Insurance can financially protect your company if current, former, or prospective employees make a claim that they experienced wrongful treatment. It’s important to maintain good employment practices to reduce the risk of claims, but even companies that have done nothing wrong could be sued by an employee. Employment practices lawsuits are on the rise, and these costly lawsuits can take up your business’s valuable resources. An EPLI policy can give your company the financial backing it needs to fend off lawsuits, however groundless, and continue building your business for the future.

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