The corporate world today is different from what it used to be several years back. Business insurance products were limited to general liability, fire, theft and all the other common products.
However, various cases against employers have brought the need for other insurance products. One of such products is the employee practices liability insurance or EPLI for short. This is a kind of product that enables you to protect your business against lawsuits ranging from wrongful termination of employment to breach of contract and invasion of privacy.
Martha, a newly married young lady decided to move to New York from Los-Angeles to be with her husband and start a family. She was lucky enough to get a job as the personal assistant to the chairman of a fairy large investment bank within a few weeks of getting to New York. She resumed immediately and started working very hard. Fortunately for her, she got pregnant within six months of marriage, and that was where the problem started.
Martha suffered many different pregnancy complications, and during the period, she was frequenting the hospital, even though she tried her best to ensure that her job didn’t suffer.
After one of such hospital episodes, she got to work on a Monday morning only to meet a letter of termination of her employment. Her employers claimed that she could not function in her current situation, so they had to let her go and replace her with someone who could do the job better. Martha was so distraught, but she made up her mind to let it go. However, her husband Steve was having none of it; he persuaded his wife to sue for wrongful termination of appointment.
Well, in the end, the case was ruled in Martha’s favor and her employers were asked to pay compensation to her as well as offset her medical bills. Regardless of how rich Martha’s employers must have been, such a lawsuit was sure to set them back a little bit. Some of the losses they would have suffered include-:
- Financial losses-: The amount paid as compensation as well as legal bills.
- Loss of goodwill-: If the case became public, sensitive customers may start to boycott the company, especially women who would feel the need to support one of their own.
- Loss of staff-: Other members of staff may start to feel insecure and start looking for employment elsewhere.
In order to protect your company from being affected by cases of employee practices liability, it is advisable to get an insurance coverage, so that claims would be paid by the insurance company and any legal expenses would also be offset by the insurers as well. EPLI insurance policy covers for cases like:
- Physical or sexual harassment in the work place.
- Discrimination in the workplace.
- Wrongful termination of employment.
- Emotional distress.
- Invasion of privacy.
- Defamation of character.
- Failure to promote.
- Failure to hire.
However, EPLI insurance doesn’t cover for cases like-:
- Health and safety violations.
- Violations of employment laws.
- Punitive damages.
- Fair Labor Standard Act violations.
- Intentional institutional claims.
If you are considering buying an EPLI policy for your business, that’s a good idea, but it must be done with utmost care. This is because EPLI is a rather new product in the insurance industry, and not so many agents fully understand it. To be on the safe side however, you should ensure the following:
How to Buy Employee Practices Liability Insurance
a. Choose a policy with comprehensive coverage
Employment laws are changing every day, and the meaning of ‘employee discrimination’ several years back may not be the same with what it is now. Therefore, you should ensure that you talk to your insurance provider about getting a policy that provides extensive coverage and covers virtually all potential employee practices liability cases.
b. Seek for control of legal decisions when claims are filed
The quality of your legal counsel matters in cases like this. Some insurance companies may not allow you to select your own legal counsel, and this may jeopardize your chances of winning the case. It is therefore advisable for you to go with an insurance company that gives you some amount of control over legal decisions.
c. Examine the extent of coverage of the policy
Ensure that you also have a full understanding of the losses covered by the policy. Apart from purchasing an insurance policy, you should also take necessary steps to reduce your exposure to liability, like training your workers and supervisory officers on how to prevent such cases and seeking legal advice and guidance on how to lower employee liability risks.
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