Employment Practices Liability Insurance: What Employers Need to Know

As an employer, protecting your business from potential risks is essential. One area often overlooked is the liability that arises from employee-related claims. Employment Practices Liability Insurance (EPLI) is a critical safeguard, yet many employers don’t fully understand what it covers or why it’s necessary. This guide will help employers evaluate their EPLI needs, understand what the coverage entails, and know what to do if their insurance company fails to uphold its obligations.

What Does EPLI Cover?

Employment Practices Liability Insurance is designed to protect businesses against claims made by employees, former employees, or even job applicants alleging violations of their legal rights.  Claims covered by EPLI may include:

1. Discrimination: Claims based on race, gender, sex, age, disability, or other protected classes.
2. Harassment: Allegations of workplace harassment, including sexual harassment.
3. Retaliation: Allegations that an employer retaliated against an employee for reporting misconduct or exercising their legal rights.
4. Wrongful Termination: Claims that an employee was terminated in violation of the law, for discriminatory reasons, or in retaliation.
5. Failure to Promote or Hire: Claims that an employer unfairly denied a promotion or hiring opportunity based on discriminatory practices.

EPLI policies typically cover legal defense costs, settlements, and judgments related to these claims, up to the policy limits.

What Isn’t Typically Covered by EPLI?

There are important exclusions employers should be aware of, including:

1. Intentional Acts: Claims arising from intentional misconduct, such as deliberate discrimination or harassment, or criminal acts.
2. Breach of Employment Contracts: Some policies may not cover claims involving violations of specific contractual terms.
3. Punitive Damages: In Colorado, punitive damages are generally not covered by EPLI policies, as they are considered penalties rather than compensatory damages.
4. OSHA Violations: Claims related to workplace safety violations or other regulatory fines.
5. Prior Knowledge/Notice: Any incidents or circumstances that were known by the employer prior to the policy period.

Employers should carefully review their policies and consider endorsements or additional coverage to address potential gaps.

Why Is EPLI Essential for Employers?

The modern workplace is governed by an intricate web of federal and state laws designed to protect employees. Even well-intentioned employers can find themselves facing costly lawsuits. Consider these key reasons to purchase EPLI:

1. Increasing Claims: Employee-related lawsuits are on the rise, with claims ranging from discrimination to wage disputes.
2. High Defense Costs: Legal fees for defending against these claims can quickly add up, even if the case lacks merit.
3. Business Reputation: An EPLI policy can help mitigate reputational damage by resolving claims efficiently.
4. Peace of Mind: Knowing you’re protected allows you to focus on running your business.

How to Evaluate Your EPLI Coverage

To ensure your business is adequately protected, consider these steps:

1. Assess Workplace Risks: Evaluate your company’s potential exposure to employee-related claims based on its size, industry, and workforce demographics.
2. Review Policy Details: Understand the scope of coverage, including exclusions and policy limits.
3. Implement Best Practices: Minimize risks by creating and enforcing clear workplace policies, conducting regular training, and maintaining thorough documentation.
4. Consult an Expert: Work with an experienced broker or attorney to review your policies and identify any gaps in coverage.

When Insurance Companies Don’t Step Up

Even with an EPLI policy in place, employers can face challenges if their insurance company fails to honor its obligations. Common issues include:

1. Claim Denials: The insurer refuses to cover a claim without a valid reason.
2. Delayed Payments: The insurer drags its feet in processing claims or paying settlements.
3. Lowball Settlements: The insurer offers a payout far below the value of the claim.

These actions may constitute bad faith, and employers have the right to challenge them.

How an Attorney Can Help

Managing EPLI policies and disputes can be complex, especially when dealing with claim denials or other insurer misconduct. An attorney specializing in insurance coverage and bad faith litigation can:

• Review Your EPLI Coverage: Determine whether your policy meets your business’s unique needs.
• Advocate for Your Rights: Negotiate with the insurance company on your behalf.
• Pursue Legal Action: Take legal steps if the insurer acts in bad faith.

Having an experienced attorney represent you can make all the difference in protecting your business and ensuring your rights are upheld.

Protect Your Business Today

Employment Practices Liability Insurance is essential for any employer, however, understanding the nuances of coverage and addressing disputes with insurers can be challenging.

If you are unsure whether your current EPLI coverage is sufficient or you have encountered issues with your insurer, contact Levin Sitcoff. Our experienced team can help you evaluate your coverage, address potential gaps, and stand up to bad faith practices.

Susan Minamizono focuses her practice on insurance coverage disputes, bad faith litigation, and high-value personal injury claims. She is recognized by Colorado Super Lawyers for her work in insurance coverage, as well as being honored as one of the Top 50 women lawyers in the state. She has also received the Colorado Trial Lawyers Association’s Consumer Protection Award. She has successfully challenged insurance coverage denials, secured high-value settlements for clients, and offered invaluable assistance as personal counsel to policyholders.