Employment Practices Liability Insurance (EPLI): What’s Covered and What’s Not

Running a business comes with many responsibilities—and one of the most significant risks is employment-related claims. From accusations of wrongful termination to allegations of workplace harassment, even a small company can face costly legal actions.

This is where Employment Practices Liability Insurance (EPLI) comes in. EPLI protects your business against claims made by employees, former employees, or job applicants related to workplace practices.

Whether you manage a small team or a larger workforce, understanding what EPLI covers and what it doesn’t is critical. This guide walks you through the key aspects of EPLI, so you can protect your business effectively.

Why EPLI Matters for Businesses of All Sizes

Employment-related claims are on the rise, and lawsuits can hit businesses of any size. Even minor claims can lead to expensive legal fees, settlements, and reputational damage. EPLI helps:

• Cover legal costs for defending employment-related lawsuits.

• Protect business assets from financial loss due to claims.

• Ensure compliance with employment laws and regulations.

• Promote a safe workplace culture by reinforcing policies and procedures.

Companies without EPLI are often forced to pay legal fees and settlements out of pocket. For many small to mid-size businesses, these costs can be devastating.

What is Employment Practices Liability Insurance?

Definition of EPLI

Employment Practices Liability Insurance (EPLI) is a specialized insurance policy designed to protect businesses from claims related to employment practices. Unlike general liability insurance or workers’ compensation, EPLI focuses exclusively on employee-related risks.

How EPLI Differs from Other Insurance

• General Liability Insurance: Covers bodily injury or property damage caused by business operations, but not employment-related claims.

• Workers’ Compensation: Covers workplace injuries to employees, but not wrongful termination, discrimination, or harassment claims.

• EPLI: Specifically covers lawsuits or claims related to employment practices, making it a critical layer of protection.

Key Coverage of EPLI

EPLI policies typically cover claims including, but not limited to:

Wrongful Termination Claims

• Protection if a former employee sues for being terminated unfairly or in violation of employment contracts.

• Example: An employee claims they were fired due to discrimination or retaliation.

Discrimination Claims

• Covers claims based on age, gender, race, disability, religion, or other protected characteristics.

• Example: An employee alleges gender discrimination in promotion decisions.

Harassment Claims

• Covers sexual harassment or workplace harassment lawsuits.

• Example: A staff member files a complaint alleging harassment by a colleague or supervisor.

Retaliation Claims

• Protects against claims that an employee was punished for reporting misconduct or whistleblowing.

• Example: An employee claims they were demoted after filing a complaint about safety violations.

Employment-Related Defamation

• Covers claims alleging false statements made about an employee in the workplace context.

• Example: A former employee claims a negative reference harmed their future job prospects.

TSM Insurance, a trusted insurance agency, helps Modesto CA business owners understand EPLI coverage and choose the right policy for their company size and industry.

What EPLI Typically Doesn’t Cover

It’s important to understand the limits and exclusions of EPLI:

Intentional Acts or Fraud

• Claims resulting from intentional illegal acts are generally excluded.

Bodily Injury or Property Damage

• EPLI does not cover physical injury or property damage—other policies handle those risks.

Pension or Benefits Plan Claims

• Employee benefit disputes, such as pension mismanagement, are usually excluded.

Pre-Existing Claims or Prior Acts

• Claims arising from situations that existed before the policy start date may not be covered.

How to fill coverage gaps:

• Consider other insurance policies like general liability, workers’ compensation, and fiduciary liability coverage.

• Review EPLI endorsements to add coverage for specific exclusions.

Why Businesses Need EPLI

Protecting Against Costly Employment-Related Lawsuits

Even small claims can rack up tens of thousands of dollars in legal fees. EPLI provides a safety net, covering:

• Attorney fees

• Settlements and judgments

• Mediation costs

Maintaining a Positive Workplace Culture

Having EPLI encourages businesses to implement strong HR practices, policies, and training programs that reduce risk.

Compliance With Labor Laws and Regulations

Employment laws in California and nationwide are complex. EPLI coverage, combined with legal guidance, ensures your company is better prepared to comply with these regulations.

How to Choose the Right EPLI Policy

Assessing Your Company’s Risk Factors

• Number of employees

• Employee turnover rate

• Past employment claims history

• Industry-specific risks

Coverage Limits and Deductibles

• Typical limits vary from $1 million to $5 million per occurrence.

• Higher limits increase premium but offer greater protection.

• Deductibles should balance cost with risk tolerance.

Adding EPLI to a Broader Business Insurance Portfolio

• EPLI is often part of a larger business insurance package.

• Combining with general liability, workers’ comp, and property insurance ensures full protection.

Working with a Modesto insurance agent with great communication and follow-through, like TSM Insurance, ensures you choose coverage tailored to your business needs.

Benefits of Working With an Insurance Expert

Expert Guidance to Avoid Gaps in Coverage

An experienced insurance agent helps identify overlooked risks and recommends policies to fill them.

Tailored Solutions for Your Business Size and Industry

• Small businesses and startups may need different coverage than larger corporations.

• Industry-specific EPLI policies address unique risks, from retail and hospitality to professional services.

A family-owned insurance agency in Modesto CA with good reviews, like TSM Insurance, provides personal service and trusted advice to make sure your EPLI coverage is complete.

Conclusion  

Employment-related claims are among the fastest-growing risks for businesses today. Employment Practices Liability Insurance (EPLI) provides critical protection against lawsuits, harassment claims, discrimination claims, wrongful termination suits, and more.

For businesses in Modesto CA, partnering with a trusted, family-owned insurance agency like TSM Insurance ensures you understand your coverage options and are prepared for any employment-related risks.

Protect your business today. Contact TSM Insurance to review your EPLI policy and safeguard your company against employment-related claims.