Understanding Employment Practice Liability Insurance

Many employers have never heard of Employment Practice Liability Insurance – EPLI – even though it could be a very important component of their insurance policy portfolio.

We recently held a webinar about EPLI, featuring a panel of professionals who shared their broad range of knowledge and experience regarding EPLI. PBO Advisory Group’s consulting CFO Francesca San Diego served as moderator and started off the program with the basic yet important question…

“What is EPLI?”

According to Muhannad Malki, risk management specialist with Insurance Office of America, EPLI is insurance that covers a business from claims associated with employment practices. This coverage used to be part of general liability policies but now it is typically excluded from such policies. If a general liability policy includes EPLI coverage, it is most likely extremely limited in scope.

Obtaining EPLI

To get an EPLI policy, an employer must have good employment policies and practices in place. Jeff Heet, managing partner of Insurance Office of America, notes this includes background checks and integrity testing as part of a strong hiring process.

The need for good policies goes beyond acquiring insurance. Nicole Devine, consulting CPO of PBO Advisory Group, advises that good onboarding, including good job descriptions and clear employment expectations, helps set the stage for a solid culture where liability is minimized. Nicole also stresses strong communication is important throughout the employee’s lifecycle at the company.

Roxana Verano, a partner with the law firm of Landegger Verano & Davis, advises the need for multi-state policies, something that can be overlooked when an employee moves. According to Roxana, if an employer has policies that adhere to California’s stringent laws, then they should comply with all other states, though checking with legal counsel is always suggested. She also notes that there is great technology now available to help employers stay in compliance with labor and employment laws.

Increased Litigation is Driving the Need for EPLI

As a lawyer, Roxana is seeing an increase in employment litigation, especially wrongful termination. She attributes this to employees being unwilling to admit they aren’t meeting expectations or don’t understand that they can be terminated, which reinforces the need for good onboarding and policies.

She also notes that a lot of prelitigation demands are being made, which give employers the opportunity to settle before the matter escalates.

Having EPLI insurance is important when it comes to claims as it will help determine what approach to take when handling the claim. She says that nuisance employment claims are currently settling in the $60,000 -$100,000 range.

Malki stresses that an employer facing a claim should call their lawyer before they call their insurance broker. He has experienced many situations where a claim is not a valid labor and employment claim.

Is EPLI Worth the Investment?

According to the insurance experts Jeff and Malki, it is important to evaluate whether EPLI is worth the investment. For some employers, especially smaller companies, the cost may not be worth it. Jeff suggests talking with your broker, attorney, and HR team or consultant to understand what you are buying and if you need it. The worst move is to “buy it just to buy it,” he notes.

However, not having it can put a business at risk.

Malki adds that EPLI pricing is based on industry, number of employees, wage scales, location, and claims history. Currently, the cost is flat from previous years. With California, Florida, and New York having the highest number of claims, employers from those states should especially review their need and the options available.

Avoiding Claims

While having EPLI insurance can be good protection, the best defense is a good offense. The entire panel stressed the importance of good policies and internal communication as a way of avoiding employment claims. Also on their list of strategies for claims avoidance are: training for managers, having the right people in the right positions, common goals throughout the company, and knowing when to get outside experts to help you.

You may view the whole entire one-hour webinar here.

If you would like more information about EPLI, please feel free to reach out to your PBO Advisory Group advisor or our webinar panelists.

Francesca San Diego
Consulting CFO & Member
fran@pboadvisory.com
(858) 935-48476

Nicole Devine
Consulting Chief People Officer
nicole@pboadvisory.com
858-622-1681 Ext. 287