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What Is EPLI Insurance and How Can It Protect Your Business?

Did you know that a business is three times more likely to be sued by an employee than experience a fire? Most employee lawsuits (41.5%) target small private companies with less than a hundred employees.

The average cost of employment liability rose by 26% within three years. If a business loses the case, the average settlement cost is around $217,000.

Out-of-court settlements are much cheaper averaging about $75,000.

However, seven out of ten businesses still don’t understand the importance of EPLI insurance.

The insurance policy proves useful in dealing with employee-related lawsuits. In this post, we explain what EPLI insurance is and how it can protect your business.

What Is EPLI Insurance?

EPLI is covered under the equal employment opportunity commission enforced laws. All employees are protected against discrimination in every aspect of employment.

But over the years, internal lawsuits keep rising, making it risky and costly for most business owners. Employment practices liability insurance is a policy put in place to shield employers from such lawsuits.

Businesses that adopt this insurance policy get a better understanding of their rights, and the employer can follow a lawsuit with a counter lawsuit if they deem it necessary.

There are many forms of EPLI claims. But some are more common and you might have seen them at least once. Here is something to look out for to avoid your business getting sued.

General Discrimination

During the hiring process, avoid asking for family medical history. Under the Genetic Information Non-Discrimination Information Act, the law prohibits the use of genetic data to approve or reject an applicant’s employment status.

Illegal Background Checks

The Fair Credit Reporting Act ensures there is privacy, accuracy, and fairness of consumer credit bureau file data. Background checks are common during the hiring process.

However, the employer must follow the Act when conducting checks on potential employees.

Pregnancy Discrimination

The Pregnancy Discrimination Act came into existence in 1964. It requires all employers to let expectant women continue working for as long as they can.

The law is also clear that a job applicant is not to be turned down for employment because of their pregnancy.

Unpaid Internship Programs

Sometimes, there is no apparent difference between an intern and an employee. Before starting the internship program, invite an expert for a review.

The expert checks if your program follows the requirements put in place by the Department of Labor for internships.

Recreational Marijuana Consumption

The legalization and decriminalization of marijuana in New Jersey has brought more freedom. Employers need to review relevant laws before dismissing a potential employee.

The business should also focus on creating favorable drug policies. These policies should focus on keeping the workplace safe. Remember to keep up with new legislation regarding marijuana usage in your location of business.

What Does Employment Practices Liability Insurance Cover

Legal action against a company is quite expensive even if you win the lawsuit. The size of the business doesn’t matter with employment lawsuits.

But smaller businesses are more likely to be affected since they cannot keep the services of lawyers. As a small business owner, EPLI insurance is the safest bet for protecting your business.

The insurance company advises the business on the steps to take to reduce the risk of employee lawsuits.

Employment practice liability insurance is typically not covered by basic liability insurance. You must purchase it as a stand-alone policy or add it to your business insurance or homeowner’s insurance.

The insurance covers legal costs, judgments, and settlements that result from the following claims.

Workplace Sexual Harassment

Following the rise of the #MeToo Movement, there has been a spike in workplace-related sexual harassment lawsuits. The claims account for 31.7% of all employment lawsuits, inclusive of LGBT-based charges.

The ELPI insurance is not limited to the business as an entity. If a director, management team, or employee receives a sexual harassment lawsuit, the policy covers any financial losses resulting from the proceedings.

Wrongful Termination Case

Employee wrongful termination charges fall under civil lawsuits. It allows employees to seek compensation for losses incurred because of the termination.

The EEOC views wrongful termination as some sort of discrimination. But it’s challenging to prove since an employer can end a contract at any time and for reasons only known to them.

To resolve future wrongful termination charges, our EPLI insurance provider vets the company’s layoff process, ensuring it is in order.

Retaliation Claims

In 2020, half of the total claims sent to the EEOC involved retaliation lawsuits. Employers lost half of the lawsuits with around 10% of cases costing over one million dollars.

But the settlement fee is directly affected by the size of the company and strength of evidence, among other factors.

Retaliation charges range from economic and non-economic damages to punitive damages. The cost of the lawsuit and attorney’s fee are some other charges you can incur.

Most small businesses don’t have $1 million for settling claims, so purchasing the EPLI insurance policy covers your business against costly retaliation claims.

Discrimination Lawsuits

The majority of workplace lawsuits fall under discrimination. There are specific laws put in place to protect employees against any form of discrimination in the workplace.

An out–of–court discrimination settlement will set a business back around $40,000. Employment practice liability insurance is responsible for covering all forms of discrimination charges brought against your business.

The rate of employment lawsuits and the cost of settlements keep on rising. You should protect your business against costly settlement fees.

What EPLI Insurance Doesn’t Cover

Though the insurance policy offers great protection against most employment lawsuits, it doesn’t cover everything. For example, if a computer breach results in privacy violations, EPLI insurance may not cover it.

Here are other scenarios that EPLI doesn’t cover.

• Punitive damages resulting from criminal activities

• Intentional or malicious acts

• Claims arising under worker’s compensation law

• Bodily injuries

• Property damage

Secure Your Business With the Best EPLI Insurance Agency in New Jersey

As more businesses grasp the extent of employment lawsuits, they are looking to EPLI insurance. Adding an extra layer of protection to your business is never a bad idea.

Especially for small businesses who can get crippled by heavy attorney and settlement costs. Central Jersey is an insurance associate firm that offers premium insurance services for business owners and homeowners.

Contact us today to discuss our ELPI insurance policy. We will help you learn how you can set up policies to avoid employment lawsuits.