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What is an Employment Practices Liability Insurance Policy?

Employment Practice Liability Insurance Policy (EPLI Insurance) is a type of insurance policy which reimburses the Insured Person for the Legal Expenses and Compensatory Damages that the Insured becomes legally liable to pay for a Wrongful Act committed, attempted, or allegedly committed or attempted, by the Insured during the Policy Period.

A Wrongful Act under an EPLI Insurance Policy relates to Employment Practices Violation. An Employment Practices Liability Insurance is usually offered as a part of a D&O Liability Insurance Policy.

What is an Employment Practices Liability Insurance Policy?

What does an Employment Practices Liability Insurance Cover?

An Employment Practices Liability Insurance Policy provides cover for legal expenses and compensatory damages for lawsuits alleging Employment Practices Violation.

Employment Practices Violation means any actual or alleged:

  1. unfair or wrongful dismissal, discharge or termination, either actual or constructive, of employment, including breach of an express or implied contract;
  2. employment-related misrepresentation;
  3. employment-related breach, violation or non-compliance with the Data Protection Act 1984 and 1998, terms and conditions of employment and the Company’s Code of Conduct, if any, or any similar legislation in any other jurisdiction;
  4. employment related libel, slander, humiliation, defamation, infliction of emotional distress, invasion of privacy;
  5. breach of any oral or written employment contract or quasi-employment contract,
  6. wrongful failure to employ or promote;
  7. wrongful deprivation of career opportunities;
  8. wrongful demotion;
  9. wrongful discipline;
  10. failure to furnish accurate job references;
  11. failure to grant tenure or negligent employee evaluation;
  12. sexual or workplace or racial or disability harassment of any kind (including the alleged creation of a harassing workplace environment);
  13. violation of employment discrimination laws (including workplace and sexual harassment)
  14. unlawful discrimination (including but not limited to discrimination based upon age, gender, race, colour, national origin, religion, sexual orientation or preference, pregnancy or disability);
  15. failure to provide adequate employee policies and procedures;
  16. retaliation (including lockouts);
  17. violation of an individual’s civil rights relating to any of the above; and (xvi) for the avoidance of doubt, any other claim pursuant to the Equal Pay Act 1970 and the Employment Rights Act 1996, relating to any past, present or prospective employee;

Some common EPLI claims include:

  • Discrimination (based on age, gender, race, disability etc.)
  • Sexual harassment
  • Wrongful termination
  • Retaliation
  • Failure to promote
  • Breach of employment contract
  • Workplace bullying and abusive work environment

What is the need for an Employment Practices Liability Insurance Policy?

Even with good HR policies and practices, employers can face employment related allegations and lawsuits. An Employment Practices Liability Insurance Policy helps protect businesses against such employment related Claims. Employment practices liability insurance protects both the organisation and its employees against personal grievance claims brought by current, prospective or former employees.

In today's legal landscape, employment-related lawsuits are on the rise. An employer is more likely than ever to face employee related lawsuits like sexual discrimination or harassment claims.

Even false allegations by employees require defence in courts which incur legal fees, thus causing losses to the business. Hence, it is very important for businesses to have an Employee Practices Liability Insurance Policy (EPLI Insurance) in place to defend and settle employee claims.

The cost of not getting covered by an Employment Practices Liability Insurance Policy is particularly high due to the following reasons.

Increase in Wrongful Termination Lawsuits - As companies downsize and lay off employees during recessions, disgruntled former employees are more likely to file wrongful termination suits alleging discrimination, lack of notification, etc. This can lead to an increase in EPLI claims.

Wage and Hour Disputes - Due to cost-cutting, businesses may violate wage and overtime pay regulations. This leads to employee lawsuits which falls under EPLI.

Discrimination Claims - Often the targets of layoffs and terminations are women, minorities and older workers. Allegations may arise claiming discriminatory firing which is an Employment Practices Liability Claim (Claim).

When these types of claims occur, proper EPLI coverage with adequate limits helps businesses to reduce the impact.

Who needs an EPLI Insurance Policy?

Any company which has employees, whether it is a Small Business/Startup or a large MNC should secure itself with an Employment Practices Liability Insurance Policy.

Large corporations or MNCs usually have adequate HR policies and employment practices in place to deal with any employment lawsuits. However, startups or small businesses are more vulnerable to employment-related lawsuits which can cause significant financial losses.

Hence, it is important that small businesses and startups are aware of the right employment practices and get insured with an Employment Practices Liability Insurance Policy (EPLI Insurance) to secure themselves from employment-related lawsuits.

How to Prevent Employee Lawsuits?

To prevent employment-related lawsuits, ensure proper employee guidelines and HR policies are in place so that all problems are averted in the first place. Having proper guidelines in place and enforcing them also helps reduce the Cost of EPLI policy.

Creating a Positive Workplace Culture - Promote diversity, inclusion and respect among all employees. Make sure that discrimination or harassment is not tolerated.

Comprehensive Employee Training - Conduct regular training on company policies and employment laws. Leave no room for doubt on expected behaviors.

Clear and Enforceable Policies - Maintain a legally compliant employee handbook that is regularly updated. Uniformly enforce policies and implement disciplinary measures where needed.

Effective Communication - Provide frequent performance updates and discuss improvement areas with employees. Explain reasons behind terminations, layoffs, denied promotions transparently.

What are the exclusions under an Employment Practices Liability Insurance Policy?

The major exclusions under an EPLI Insurance Policy are as follows:

Exclusions under an Employment Practices Liability Insurance Policy

Any Claim due to Dishonest or Fraudulent Act of the Employer is excluded

Any Claim due to an Act committed prior to start of the Policy is excluded

Criminal Fines and Penalties are excluded

Any Claim arising out of an Employment Practice Violation out of the insured serving in a capacity as a director or officer of an outside entity if such claim is brought by a director, officer or any shareholder of the outside entity is excludes

What is the Claims Process under an Employment Practices Liability Insurance Policy?

The Insured needs to follow the below mentioned steps to make a claim under its EPLI Insurance Policy:

Step 1: Intimate the EPLI Claim to the Insurance Company immediately. Submit the necessary details such as Policy Number, ID Proofs, GST Certificate and Lawsuit Details.

Step 2: If the claim is admissible, the Insured can appoint a lawyer with the consent of the Insurance Company to defend himself against the lawsuit in the courts.  The Policy provides reimbursement for Lawyer fees, Litigation Expenses and Compensatory Damages awarded by the courts.

What is the Cost of Employment Practices Liability Insurance Policy?

The cost of EPLI Insurance depends on the type of business, the number of employees and various risk factors such as whether the company has been sued over employment practices in the past. An EPLI Insurance Policy reimburses the Insured against the costs of defending a lawsuit in court and for judgments and settlements.

What is the Claims Process under an Employment Practices Liability Insurance Policy?
Coverage for Ongoing Operations and Completed Operations outside premises

Coverage for Ongoing Operations and Completed Operations outside premises

Worldwide Cover

Worldwide Cover

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Get Best EPLI Insurance Quotes with Qian!

Today, businesses face considerable risks from employment-related lawsuits alleging discrimination, harassment, wrongful termination and other labor law violations. The costs to defend and settle these claims can easily cause significant financial losses to companies.

Securing suitable EPLI coverage for small and big companies alike is considered important. Premium costs are reasonable given the significant financial exposures. As an insurance broker, Qian partners with top insurance companies to provide comprehensive Employment Practices Liability Insurance Policy.

We can provide EPLI coverage as an endorsement to your Directors and Officers Policy or as a standalone EPLI Insurance Policy. Our team recommends the optimal approach based on your specific organizational risks and needs. We aim to provide comprehensive coverage, competitive rates and superior claims support.

To learn more about getting a tailored Employment Practices Liability Insurance solution for your business, email us at insurance@qian.co.in or call 022-22044989. We would be glad to assist you.

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