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Employment Practices Liability Insurance (EPLI)

Protection in case an employee or applicant sues

The importance of having Workers' Compensation coverage in the event of an employee suffering job related physical injury, disease or illness is well understood. Even if Massachusetts law didn't require it, many businesses would purchase this coverage. But, what about situations that don't involve physical "injury" such as:

  • Discrimination
  • Sexual harassment
  • Wrongful termination
  • Employment contract breach
  • Wrongful discipline
  • Emotional distress
  • Failure to employ or promote

Small business owners are often surprised that they are just as vulnerable to the same worker complaints that plague larger corporations. Unless your company has Employment Practices Liability Insurance (EPLI), you don't have protection for these and other types of situations. One reason that businesses sometimes underestimate the importance of purchasing this coverage is because these issues are less tangible. However, lawsuits are a real risk.

Many business owners want to create a friendly, informal environment, which sometimes result in human resources procedural lapses that could leave your company vulnerable. Your company can reduce employment practices risks by developing and implementing an employee manual containing policies that address non-discriminatory hiring practices, sexual harassment and disciplinary procedures. Even with such measures in place, situations can arise that can lead to legal action, which is why having protection is important.

An EPLI policy generally provides coverage for legal defense and court judgments; however, it may not cover punitive damages or civil and criminal fines. Some Business Owner Policies (BOPs) offer limited EPLI coverage. Coverage availability varies by business type and the insurance company providing the policy. Standalone EPLI policies are also available.

For more information about EPLI, please contact us. You may find the sites below helpful as resources for additional HR related information:

Employment Law Handbook >
Massachusetts Labor & Workforce Development >
Society for Human Resources Management >
About.com: Human Relations >