Do I Need Employment Practices Liability Insurance?

If you own or run a company with employees the answer is an emphatic “yes.” Most companies purchase Workers’ Compensation Insurance, whether it’s required by law or for financial protection, to cover them for injuries, illness or disease employees may incur while on the job. However, many are unaware that they are not covered for losses that may arise for claims of non-physical damages to an employee. Employment Practices Liability Insurance (EPLI) is designed to provide coverage for losses of these types, including:

• Wrongful termination
• Discrimination
• Sexual harassment
• Breach of employment contract
• Mismanagement of employee benefits
• Wrongful discipline or negligent evaluation
• Emotional distress or wrongful infliction
• Failure to employ or promote
• Deprivation of career opportunity


Even if you have not opened your doors for business, once you begin the hiring process this coverage should be in place. Cost for this coverage will vary based on the type of business, number of employees and various other risk factors, including previous losses of this nature. The policy itself will generally provide you with legal defense and pay court judgments and settlements. The policy may not cover punitive damages or civil and criminal fines. EPLI policies do not cover liabilities that would be covered under Workers’ Compensation policies.

In addition to using the risk management practice of risk transference to insurance for this exposure, it will benefit your company to perform the practice of risk reduction by taking steps to prevent lawsuits of this type. This can be done in a number of practical ways, including:

• Detail and maintain up-to-date corporate policies dealing with these exposures in employee manuals and regularly distribute them to all employees. Far too many companies do not have employee manuals that deal with these issues, leaving themselves wide open to potential employment practices lawsuits.
• Implement hiring policies to avoid discrimination.
• Have a clear sexual harassment policy. Educate both employees and supervisors about the company’s stance on the issue, including steps one should follow should an incident occur.
• Document everything involving employee complaints and the steps you take to prevent and solve employee disputes.

This coverage may be included in some non-aviation Business Owner Policies (BOP), but it is not covered under aircraft or aviation general liability policies. For additional information about EPLI or for a quote to purchase this coverage, please contact your insurance agent.

The information above is a general description of Employment Practices Liability Insurance. Actual policy wordings and coverages may vary by insurer.

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