Most business owners rely on a good team to help their company succeed. However, you may also expose your company to risk the moment you begin the hiring process.

Without adequate commercial insurance, your company might end up having to spend thousands of dollars to resolve an employee lawsuit. In 2022 alone, the Equal Employment Opportunity Commission resolved 65,087 discrimination cases and secured over $381.7 million for victims of discrimination in U.S. workplaces through voluntary resolutions and litigation.

Employment practices liability insurance, or EPLI, gives small-business owners peace of mind that they won’t have to cover employee claims out of pocket.

Why you need EPLI

Employers of all sizes are subject to federal, state and local laws regarding employment practices. According to Founders Professional, a wholesale insurance brokerage specializing in professional and management liability insurance risks, almost half of all EPL-related claims come from businesses that have less than 100 employees.

EPLI can be especially important in industries that have high employee turnover, like restaurants, construction, manufacturing and retail. If you look at the EEOC’s summary of recent cases, you’ll see that many of the companies sued are in those industries.

Founders Professional also says over 60 percent of all employers will be sued by former employees, reinforcing that no business, regardless of size, is immune to a potential claim. So even outside of those high-risk industries, it’s wise to buy basic EPLI coverage if your business can afford it.

In addition, employers are increasingly using artificial intelligence to complete or assist with human resource-related functions and may unknowingly violate antidiscrimination laws due to the limitations of AI technology.

What does employment practices liability insurance cover?

By definition, employment practices liability insurance covers businesses against claims by employees that the company has violated their civil rights, but those claims can vary. The following types of claims are typically covered by EPLI:

  • Discrimination based on age, disability, gender, national origin, race or religion
  • Sexual harassment
  • Wrongful termination
  • Retaliation (taking negative actions against an employee because they report discriminatory practices)
  • Employment-related defamation
  • Invasion of privacy
  • Failure to promote
  • Breach of employment contract
  • Deprivation of a career opportunity
  • Negligent evaluation
  • Lack of appropriate pregnancy and lactation accommodations
  • There may be limited coverage for immigration claims, such as failure to check an employee’s work status
  • There may be limited coverage for wage and hour claims

Generally, EPLI will cover actions committed by anyone within the organization, whether that’s someone in top management or an entry-level employee. And most policies will cover the cost to settle a case out of court, as well as defense costs if an employee lawsuit goes to court. That said, every EPLI policy is different, so it’s wise to read the fine print.

Says Brooke Thomas, associate director, Commercial Lines, Keyser, “Costs covered by EPLI policies vary from carrier to carrier, so while most cover settlement costs, some set limits on coverage for defense costs or don’t cover defense costs at all. The best EPLI policies provide set limits for settlement and unlimited defense costs beyond that limit.”

Claim Examples

  • A partner in a large law firm in the Northwest took maternity leave. Upon returning from her leave, she learned the firm had promoted another individual to her partner role and her services at the firm were no longer needed. She sued the firm for wrongful termination.
  • A male manager of a small restaurant in Texas sent explicit text messages to a female employee and promised her a promotion if she went out with him. When she refused, the manager cut back her hours significantly. This resulted in a sexual harassment and retaliation claim against the restaurant.
  • A gym in Southern California required all their employees to clock out at 10 p.m. when gym hours ended. Many employees were required to stay unpaid after closing to clean up the gym and organize the equipment. This resulted in a substantial wage and hour lawsuit against the organization.
  • A front desk employee at a large Michigan medical office quit and sued her employer for a hostile work environment. She had reported bullying to her supervisor on four different occasions and the supervisor ignored her allegations.

Your Keyser Commercial Lines team knows EPLI coverage. To learn more, talk to a member of your Keyser service team or connect with us at 877-381-3570 or