Employment practices liability insurance covers claims by employees, former employees and job applicants alleging discrimination, harassment, wrongful termination, retaliation and similar employment wrongs. It pays defense costs and settlements or judgments for covered claims. Wage and hour claims are usually excluded or carry a small sublimit for defense only.
What it usually covers
- Discrimination claims based on protected characteristics
- Sexual and other workplace harassment
- Wrongful termination and retaliation
- Failure to hire or promote and similar employment decisions
- Defense costs for covered claims, including agency charges where included
- Third party discrimination or harassment claims by customers, where added
What it usually leaves out
- Wage and hour claims, which are usually excluded or sublimited for defense only
- Bodily injury and workplace injuries, which belong under workers’ compensation
- Benefit plan obligations, which belong under fiduciary liability
- Fines, penalties and the cost of reinstating an employee
- Claims known before the policy started or tied to acts before the retroactive date
Who typically needs it
- Employers of any size, since claims can come from a single employee
- Businesses hiring, managing or letting go of staff
- Restaurants, retailers and other high turnover employers
- Companies whose investors, lenders or clients require it
What shapes the price
- 01Number of employees and where they work
- 02Employee turnover and recent layoffs
- 03Written handbook, training and complaint procedures
- 04Prior employment claims
- 05Limit, retention and coverage options
How limits and terms work
EPLI is usually written on a claims made basis, so the retroactive date and continuous coverage matter.
Defense costs often reduce the limit, and the insurer may have the right to choose defense counsel.
A consent to settle clause can shift costs to the employer if it refuses a settlement the insurer recommends.
Questions to ask before you buy
- Is there any wage and hour defense sublimit
- Do defense costs reduce the limit
- Are independent contractors and job applicants covered as claimants
- Is third party discrimination and harassment included
Employment practices liability questions, answered
Does EPLI cover wage and hour claims?
Usually not in full. Most policies exclude claims for unpaid wages, overtime and similar wage and hour violations. Some offer a small sublimit that pays defense costs only, not the wages owed. California employers should ask about this gap directly, since wage and hour rules here are detailed and strict.
Does a small business with a few employees need EPLI?
Any employer can face a claim from a current employee, former employee or job applicant, and defense costs can be significant even when a claim lacks merit. Whether the policy is worth buying depends on headcount, turnover, hiring practices and the premium. General liability policies typically exclude employment claims.
General information only. Coverage, limits and exclusions depend on the policy an insurer issues and the state where you operate.