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Author:  David Griffiths, Insurance By Ken Brown, Inc.,
This article appeared in the December, 2014 issue of Florida Pool Pro

Employment Practices Liability Insurance (EPLI) covers companies against lawsuits or claims filed by employees, former employees, and employment candidates. The insurance coverage protects the company, its directors, officers, and other employees. A company can use this type of insurance to cover expenses associated with employee rights violations, such as alleged acts of discrimination and wrongful termination.

Types of Lawsuits and Claims EPLI Insures

EPLI insures against claims of discrimination (based on age, sex, race, religion, color, and national origin), sexual harassment claims, wrongful termination, infliction of emotional distress or stress and breach of contract, among others. The insurance covers claims and lawsuits filed against directors and officers regarding allegations of misconduct in how they treat employees, shareholders, and decisions that affected the company.

Benefits an EPLI Policy Provides

If the insured company has to deal with a lawsuit or claim, the insurance company will reimburse the company for expenses incurred by handling the lawsuit. These expenses will be covered regardless of the outcome of the case. The policy will also cover the cost of any settlements or judgments entered against the company. EPLI policies do not usually cover criminal fines, civil fines, penalties, or punitive damages. EPLI also excludes coverage for claims that are covered by other insurance policies, such as property damage or bodily injury claims.

Factors That Affect the Cost of EPLI Coverage

Some factors that affect the cost of EPLI include the size of the company, the type of business it is, the number of employees, where the business is located, the number of claims, lawsuits previously filed, and the length of time the company has been in business. Insurance companies may also take other factors into consideration when deciding the cost of the premium and structuring a policy best suited for the company.

How a Company Can Reduce Exposure to Lawsuits

To reduce the likelihood of being sued for an employee rights violation, the company should review and update its employee manual to make sure it is in full compliance with the most recent federal and state laws. The company should educate employees on actions and conduct that is considered illegal in the workplace. Employees should be informed of company procedures for handling complaints of employee rights violations. The company should keep a record of any complaints filed by employees and document how those complaints were handled.

How to Decide if the Company Should Obtain EPLI Coverage

If a company is at risk of being sued for one of the violations covered by EPLI, it should seriously consider obtaining insurance. An insurance company can tailor a policy that would be most beneficial for the company and its needs. Dealing with employment lawsuits can be extremely costly for a company that does not have the proper insurance coverage.
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