EPLI: Avoiding Work-Related Lawsuits

If you've been following the news at all, then you know that work-related lawsuits are quite popular, which is why many employers are purchasing employment practices liability insurance (EPLI).

The number of civil suits filed by employees against their employers has more than quadrupled since the year 2000, and employers are slowly beginning to realize that they put themselves at great risk for liability without some form of liability insurance. Today, more than 40 nationwide insurance agencies carry EPLI, and it is an intelligent investment for anyone who employs others.

EPLI covers a variety of work-related litigation problems, including the cost of defense (counsel); judgments against the company, executive officers, employees and contractors; and out-of-court settlements that meet the obligations of the EPLI policy.

In addition, EPLI policies cover legal actions regarding the following:

- Any Type of Discrimination
- All Types of Harassment
- Wrongful Termination
- Mismanagement of Employee Benefits
- Emotional Distress Caused by Employer
- Negligence
- Failure to Employ or Promote

EPLI policies do not, however, cover the following:

- Workers' Compensation Lawsuits
- Bodily Injury Lawsuits
- Property Damage Lawsuits
- Circumstances Covered by Other Insurance Policies

Coverage and premiums for EPLI policies differ from state-to-state, and may provide different amounts of coverage depending on several factors.

A company that is interested in EPLI coverage will be evaluated based on several different factors, including: number of employees; turnover ratio; human resource policies; and previous harassment or bias lawsuits against the company.

ELPI premiums range from $750 to several thousand dollars per year for ELPI coverage, which largely depends on the number of employees. A company with fifteen employees, a stable human resource department, and no previous lawsuits against the company will incur a premium of approximately $1,500 per year in most states.

In order to ensure a low ELPI premium, it is important for a company to lower its risk factor. This can be done by:

- Testing prospective employees for drug and alcohol use, including random drug testing after employment;
- Forming a zero-tolerance policy against discrimination and harassment;
- Developing an employee handbook that explicitly defines the job descriptions and expectations for each employee;
- Performing regular (every three-to-six months) evaluations of all employees; and
- Discussing options with ELPI providers regarding workplace liability.

ELPI policies are not for every company, and you must weigh the expense of such a policy against the possibility for litigation. Discuss this issue at length with a corporate attorney and evaluate any past problems within your company.