Read our guide for everything you need to know about employment practices liability insurance for your financial services business.
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What is employment practices liability insurance?
Employment practices liability insurance, also known as EPL insurance or EPLI, protects against lawsuits filed by employees against your company. Specifically, EPL insurance protects against suits involving claims of wrongful treatment, such as discrimination or harassment, and covers any judgments or legal fees associated with these claims.
Example: A female employee in your investment firm is fired because she was not completing her work to your satisfaction. She sues your company, saying you unfairly prioritize male employees and fired her based on her gender. Your employment practices liability insurance would cover the cost of the lawsuit and any associated damages against your company.
Who needs employment practices liability insurance?
If your business hires employees, whether they be full-time, temporary, or independent contractors, EPL insurance is recommended. Although most people think of only large companies being susceptible to discrimination lawsuits , in reality, small businesses are the most vulnerable to employment claims. Most small businesses lack a legal department, employee handbook, and other procedures to reduce the risk of claims.
What does employment practices liability insurance cover?
Common coverage under this policy includes:
- Sexual Harassment
- Wrongful Termination, Discipline, or Infliction of Emotional Distress
- Breach of Contract
- Failure to Hire, Employ, or Promote, or Deprivation of Career Opportunities
- Invasion of Privacy
- Negligent Evaluation
- Violation of Leave Laws
Examples of EPLI claims
An executive administrator at your investment firm claims that she was the victim of sexual harassment over a two-year period at your company. She presents evidence for her claim, including specific incidences of harassment and her daily encounters with abusive language. The woman sues your company for damages.
A job applicant who uses a wheelchair is not hired for an investment advisor position at your company. The applicant is qualified for the position, but the hiring manager tells the applicant he would not be a fit given that the position requires frequent travel. The applicant sues your company for discrimination.
Employees belonging to a racial minority feel they are being denied promotions at your accounting firm due to their race. The employees file a class action lawsuit against your company.
An employee is injured at work and files a workers’ compensation claim against your investment brokerage. The employee takes time to recover and returns to his job. However, a month after he returns to work, he is fired. He sues your company for retaliating against him for filing the claim.
What doesn’t employment practices liability insurance?
EPL insurance exclusions include:
- Punitive Damages
- Civil or Criminal Fines
- Bodily Injury
- Property Damage
- Intentional or Dishonest Acts
- Wage and Hour Law Violations
- Violations of ERISA, COBRA, or the WARN Act
- Failure to Pay Unemployment
- Breach of Contract and Claims under the National Labor Relations Act
How much does employment practices liability insurance cost?
The cost of employment practices liability insurance depends on a number of factors, including the size of business, number of employees, employee turnover rate, and coverage limits. While the range of pricing can vary widely, most small business owners can expect to pay annual premiums between $800 to $3,000. High deductibles for EPLI can offset your annual premiums, with some EPLI deductibles reaching as much as $50,000, but depending on the risks your business faces, you may or may not want to take on such a high deductible.