EPLI Insurance: Cost, Coverage & Providers

Employment practices liability insurance (EPLI) covers claims arising from employment-related issues such as wrongful termination, discrimination, and sexual harassment. EPLI insurance costs depend on several factors, including business size, employee turnover, and industry. Small businesses can get EPLI endorsements for as little as $300 annually, while standalone EPLI may cost $800 – $5,000 per year.

For a free, no obligation EPLI insurance quote, check out The Hartford. Their experts can assess the EPLI needs of your business and get you a customized quote in minutes.

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EPLI Insurance Providers

Many carriers focus their EPLI insurance on larger companies, so finding coverage designed for small business can be tricky. Because employment practice liability claims can be expensive, small business owners may want to consider large insurers with good credit ratings from ratings agencies like Moody’s and A.M. Best. That way, the owner can rest assured covered claims will be paid.

Top Employment Practices Liability Insurance Providers

Our list includes four examples of small business insurance carriers with good credit, plus one broker that partners with multiple top-rated insurance carriers.

The Hartford

The Hartford is a large national carrier that earns A ratings or higher from ratings agencies. While The Hartford sells insurance products to businesses of any size, they have a team dedicated to helping small business owners meet their individual insurance needs.

The Hartford offers EPLI as part of a management liability package that comes with five other optional coverages, including crime insurance, fiduciary liability, directors and officers, cyber liability, and kidnap coverage. This makes The Hartford ideal for business owners who want to a management liability package tailored to their operations.

AmTrust

In its 20 years of experience, AmTrust has grown to be one of the largest commercial insurers in the U.S. The company has solid financial ratings and a division dedicated to small business, and these factors allow AmTrust to offer affordable coverage to small business owners.

One example of AmTrust’s affordable coverage is their EPLI insurance. Where most insurers require yearly premiums of $1,500 to $2,500, AmTrust’s product has no minimum charge. Moreover, their EPLI covers all employees, including part-time, temporary, seasonal, and voluntary workers. This makes AmTrust an excellent small business insurance option for business owners who want quality EPLI at a good price.

CoverWallet

CoverWallet is an online small business insurance brokerage, which means they can provide EPLI insurance from top carriers, including CNA, Liberty Mutual, and Chubb. These partnerships allow CoverWallet to offer multiple quotes for many different types of insurance policies.

Business owners who want to compare prices before they get EPLI insurance should considering applying through CoverWallet. The company’s application often returns multiple quotes from quality carriers, so business owners can compare and bind coverage in under ten minutes.

Allstate

Allstate may be better known for their home and auto insurance policy, but the company is also a respected business insurance provider, earning A ratings or higher from the top credit rating agencies. The company offers their insurance products through local agents and can offer quotes for many policies online.

Allstate is unique among carriers because they sell standalone EPLI but can also add the coverage to their business owner’s policy. This makes Allstate a smart choice for small business owners with limited EPLI exposures.

State Farm

With over 65,000 employees and 83 million policies and accounts across the U.S., State Farm is one of the largest insurance companies in the world. They balance their size by selling insurance products through a network of 19,000 local agents, who provide personalized service to all their clients.

State Farm is a top choice for business owners who want to pair their EPLI insurance with HR training. All EPLI policyholders have access to a human resources website and employment practice hotline to get assistance in managing employees, setting up HR procedures, and minimizing turnover. Using best practices like these can reduce the likelihood of EPLI claims, and ultimately reduce costs.

What Employment Practices Liability Insurance Is

Employment practices liability insurance pays for your legal defense in employment-related lawsuits. Policies typically cover claims brought by current and former employees but can also extend to job candidates, whether or not they are hired. EPLI insurance is not industry-specific, so business owners need to determine their exposures to determine appropriate coverage.

Any business with employees has some degree of exposure to employment-related lawsuits. According to a recent study by Hiscox, U.S. companies have a 10.5% chance of being sued over employment practices. The study also shows the average cost of small business EPLI claims is $160,000 when a legal defense and settlement are required. However, business owners with EPLI insurance only pay their deductible or self-insured retention when claims are covered.

What EPLI Insurance Covers

EPLI insurance covers wrongful acts in the hiring and employment processes. These acts may occur when an employer is recruiting, interviewing, and evaluating candidates and after candidates have been hired. Coverage is triggered when an employee or a group of employees claim their legal rights have been violated.

Some claims covered by employment practices liability insurance include:

• Sexual harassment
• Discrimination
• Wrongful termination
• Retaliation
• Failure to promote or employ
• Invasion of privacy
• Deprivation of career opportunity
• Negligent evaluation
• Mismanagement of employee benefits

Employment practices liability insurance policies cover business owners as well as directors, officers, and managers. Some policies also cover employees. Additionally, you can buy third-party EPLI policies to cover claims brought by non-employees, such as clients.

What EPLI Insurance Doesn’t Cover

Items not covered in an insurance policy are called exclusions, and it’s important to note these exclusions before buying EPLI insurance. Common EPLI exclusions are sometimes covered by other policies, but you want to be sure you know what’s excluded so you can avoid coverage gaps and better protect your business.

Some of the events typically excluded from EPLI insurance include:

• Third-party bodily injury and property damage: Covered by general liability insurance
• Employees’ work-related illness or injury costs: Covered by workers’ compensation insurance
• Intentional or dishonest acts: Insurance does not cover a policyholder’s intentional behavior or criminal activity; commercial crime insurance often covers an employee’s dishonest acts
• Wage and hour claims: EPLI usually excludes these claims, but some insurers offer coverage through endorsements

EPLI Insurance vs Employer’s Liability Insurance

Some business owners confuse employment practices liability and employer’s liability insurance. While they have similar names, these policies cover different aspects of the employer-employee relationship.

Employment practices liability insurance covers an employer’s treatment of employees and job candidates. If an employee claims they’ve been treated unfairly, EPLI covers the cost of defending the employer. Employer’s liability, however, covers accusations that an employer’s negligence caused an employee’s work-related illness or injury and is often part of workers’ compensation insurance.

Claims-made vs Occurrence EPLI Insurance

Most insurance companies offer employers liability insurance as a claims-made policy. This means the insurer only covers claims when both the triggering incident and the claim notification occur when your policy is active. The other option is occurrence policies that cover events that occur while your policy is in force, regardless of when you file the claim with the insurer.

For example, let’s say you close your business and cancel your EPLI policy, and a former employee files a sexual harassment lawsuit against your business a year later. Although the incident occurred while your EPLI insurance was active, the claim was made after the policy was cancelled. With a claims-made policy, your claim would not be covered. However, an occurrence policy would cover the claim.

EPLI Insurance Costs

EPLI insurance costs typically range between $800 and $5,000 in annual premium, but many small business can find coverage for around $1,200 per year. However, some insurers offer EPLI endorsements business owners can add to their business owner’s policy that start around $300 per year.

EPLI Insurance Costs & Deductible

To get a better idea of where your business falls on the annual cost range, consider the various factors affecting EPLI rates such as the number of employees, employee turnover, and industry. Higher numbers in any of these typically increase your premium.

The most important factors that affect the cost of EPLI insurance include:

• Number of employees: The more employees you have, the more exposure you have to EPLI claims, and that increases your costs.
• Employee turnover: High turnover rates demonstrate greater potential for employment practices claims like wrongful termination. The higher risk can increase your premium.
• Hiring and firing practices: Discrimination and wrongful termination claims often stem from hiring and firing practices, so EPLI underwriters typically investigate your procedures and adjust your premium accordingly.
• Claims history: Insurers typically increase premiums for businesses with past EPLI insurance claims, especially if those claims occurred in the past three years.
• Coverage amount: Larger businesses with higher revenue have more to protect, so they often select higher coverage amounts and that increases their costs.
• Deductible or self-insured retention (SIR): EPLI insurance often has either a deductible or a self-insured retention, both of which are the amount the policyholder is responsible for in a claim. Selecting a higher amount typically lowers your premium.

All of these factors combine to form a risk profile your insurance carrier’s underwriters use to rate your policy.

EPLI Deductibles & Self-insured Retentions

Some EPLI policies have deductibles, but they’re more likely to have self-insured retentions. Both represent the amount the policyholder is responsible for in a claim, but they work differently. A self-insured retention (SIR) is an amount you’re required to pay that is not covered by your EPLI. Once you’ve paid your SIR, your insurer makes any additional payments. With a deductible, your insurer typically pays for your defense, and then seeks reimbursement from you as the policyholder.

As the client, you can usually determine the amount of the SIR or deductible. Setting a higher amount for either usually lowers your premium, but it also increases the amount you pay in an employment lawsuit. Moreover, SIRS need to be paid before your insurer pays its portion, so you need money on hand in the event of an EPLI insurance claim.

Who Needs EPLI Insurance

While EPLI insurance is recommended for most employers, not all businesses need this coverage. As with any insurance policy, you have to evaluate your risk and your ability to recover if the worst-case scenario occurs. For EPLI, risk typically goes up as you hire more employees and then hire managers to oversee those employees.

Small businesses should not overlook the importance of EPLI coverage.

“Businesses of all sizes are at risk of litigation. An EPLI lawsuit, whether it’s valid or not, can be extremely expensive and damaging to any business. In FY 2017, the Equal Employment Opportunity Commission (EEOC) handled over 540,000 calls to their toll-free number and more than 155,000 contacts about possible charge filings in field offices, resulting in 84,254 charges being filed. As a result, the EEOC secured approximately $484 million for victims of discrimination in the workplace.”

– Anthony Giordano, Senior Vice President, HUB International Northeast

Other Policies Associated With EPLI Insurance

EPLI is often purchased as a standalone policy or an endorsement to another policy. However, some insurers offer EPLI as part of another product called management liability insurance. Typically, management liability insurance is a package policy that includes other coverages.

Other coverages that may be included in management liability insurance include:

• Directors and officers insurance: Covers board members, directors, and officers in case they’re sued for managerial decisions
• Fiduciary liability insurance: Covers lawsuits over mismanagement of employee benefits due to errors, omissions, or breach of fiduciary duty
• Special crime insurance: Cover costs associated with kidnapping, ransom, or extortion

While they may be included in management liability insurance, these policies may also be purchased as standalone policies.

Tips on Getting Employment Practices Liability Insurance

Once you decide to get employment practices liability insurance, make sure your policy suits your unique business needs. In general, that requires some forethought on your part, but it can also mean getting help from a knowledgeable insurance agent.

Some important tips to keep in mind when you’re shopping for EPLI include:

1. Evaluate Your Insurance Needs

Different operations and industries have different risks, and assessing those exposures correctly is essential to getting the right EPLI policy for your business. Working with an agent who has experience with both EPLI and your particular industry is one way to make sure you’ve identified all of your exposures and have coverage for them.

“Small business owners should seek coverage for acts that occurred prior to the policy inception date, which may be available at no extra charge. If your business utilizes seasonal, temporary, leased, or contract employees, you should make sure the policy provides appropriate coverage. Adding coverage for claims brought by third parties, such as customers, may be advisable for businesses facing that exposure.”

– Judy Selby, Judy Selby Consulting

2. Reduce Your Risks Before You Apply

Taking proactive measures to reduce your risk before applying for EPLI can help lower your costs. For example, discrimination and sexual harassment can be big risk exposures for many businesses. Having written employment policies, such as anti-discrimination and hiring and firing procedures, can help prevent claims.

Other ways you can reduce EPLI insurance claims include:

• Require employees to sign an employment-at-will policy: This document explains how employees can be terminated without the employer having to provide a just cause.
• Create an employee handbook: For instance, your handbook might outline discrimination and harassment policies and introduce the proper reporting channels.
• Provide employees with proper training: Every employee should be taught how to avoid harassment and discrimination and how to report it when they see it.
• Establish protocols for handling complaints: In addition to immediately investigating harassment claims, you want to create a system to document them and administer discipline as necessary.

“Be sure to have your policies and practices audited and reviewed by an employment lawyer prior to submitting for coverage. Often, underwriters will want to know what sort of employment policies and safeguards the business has in place. For example, does the business have a complaint procedure accessible to employees? Do you have a handbook that was reviewed by an employment law attorney? These considerations will help provide a more applicable policy for your needs.”

– Faith Whittaker, Partner, Dinsmore & Shohl

3. Choose Your EPLI Coverage Limits Wisely

EPLI claims can be extremely expensive. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000. Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns.

4. Weigh SIRS & Deductibles Against EPLI Costs

EPLI policies typically have minimum deductibles or self-insured retentions (SIRs), and some employers opt to increase theirs because that can reduce their premium. However, cutting costs by increasing the amount your responsible for can be a bad financial decision because it means more out-of-pocket costs in a claim.

Employment Practices Liability Insurance Frequently Asked Questions (FAQs)

EPLI is probably not as well known among small business owners as some of the more fundamental coverages such as general liability, so many may have additional questions about how it works before they can decide if it’s right for them. We’ve answered a few of the most commonly asked questions here. If you have other questions, please post them in the comment section or in our forum.

Does EPLI insurance cover independent contractors?

Some insurers sell employment practices liability insurance that covers independent contractors, but not all do. Unfortunately, business owners can be sued for the actions of their 1099 employees. If having coverage for independent contractors is important for protecting your business, you should review your policy carefully.

Does EPLI insurance cover wage & hour claims?

Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.

Is EPLI included in workers’ compensation insurance?

Many employers confuse employment practices liability insurance with employer’s liability coverage, also called part two of workers’ compensation insurance. While the names are similar, they cover different risks. EPLI pays claims of wrongdoing in the employment process and generally deals with financial loss. Employer’s liability covers allegations of negligence leading to employees’ illness and injury.

Bottom Line

Almost any small business with employees may be at risk of employment-related incidents that can lead to expensive claims. EPLI policies cover these claims by paying for your legal defense, including awards and settlement, when you or your managers face employment practices lawsuits such as wrongful termination, harassment, and discrimination.

The Hartford makes insuring your business against EPLI claims easy. Their experts will create a customized policy to cover you against EPLI claims at the right price. Get a free, no obligation quote online in minutes.

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