Managing employees is hard, and among the biggest employee-related challenges a business will face is managing an employment lawsuit.

One way to guard against this risk is through employment practices liability insurance (EPLI), which covers employment liability damages and defense costs from claims brought by employees or former employees for employment discrimination or wrongful termination, among other things.

Many employers are not aware that they can insure against this type of risk, or assume that the risk is covered by other policies. There are several issues that businesses should consider when obtaining EPLI.

UNDERSTAND THE EXCLUSIONS AND POLICY LIMITS

Most policies exclude coverage for claims involving ERISA, wage and hour laws, and breach of contract, as well as claims for bodily injury and property damage. Also, like all insurance, EPLI has policy limits. Read your EPLI policy closely, and in conjunction with your other policies, to understand the full scope of your coverage.

TWO TYPES OF POLICIES

EPLI policies come in two types: occurrence and claims-made. Occurrence policies protect against incidents that occur while the policy is in effect, regardless of when the claim is reported. Claims-made policies protect against claims that occur and that are reported while the policy is in effect.

COVERAGE FOR PRIOR ACTS

Coverage for prior acts is available, even to most first-time EPLI policy buyers. Employers, therefore, can guard against prior incidents, as well as future ones. Prior acts coverage may be fully retroactive, or limited to a particular period of time (for example, three years). Keep in mind, though, that failure to disclose facts, such as prior employment lawsuits, can result in recission of coverage, both for primary and prior acts policies.

CONCLUSION

These are just a few of the many important issues to consider when purchasing an EPLI policy. EPLI guards against legal risk, so consult with legal counsel to understand the implications of these policies. Need help with an existing EPLI policy, or in obtaining a new one?