EPLI insuranceThe #MeToo Movement has brought the practicality of employment practices liability insurance (EPLI) for your business to the forefront.

EPLI is insurance against employment claims, including sexual harassment. Along with harassment, policies typically cover claims of discrimination – such as sex, race, age, religion, national origin, disability or equal pay – wrongful termination, or other employment-related issues, such as failure to promote. Claims may be filed by employees, former employees and employment candidates.

Presently, only three out of 10 companies carry EPLI, according to TrustedChoice.com. But small businesses in particular should consider buying EPLI. Small businesses are at high risk because they usually lack a legal department and sometimes even an employee handbook detailing the policies and procedures that guide hiring, disciplining or terminating employees.

According to The Hiscox Guide to Employment Lawsuits, in 2016, California companies had a 46 percent chance of being hit with a charge of discrimination of one kind or another.

It’s only a matter of time

With the #MeToo movement in full cry, it’s only a matter of time before sexual harassment claims start arriving.

Purchasing an EPLI policy for the first time can be tricky. For example, not all policies spell out the definition of harassment.

Under Title VII, courts decide on two types of sexual harassment claims: quid pro quo and hostile work environment claims.

Your policy’s definition should include unwelcome sexual requests, advances, favors and other verbal or physical conduct of a sexual nature that:

  1. Are made as a condition of employment
  2. Are used as a basis for employment decisions
  3. Interfere with performance
  4. Create an intimidating or hostile work environment

Understand the terms of your policy

That can include anything from sharing inappropriate jokes or photographs to crude language, suggestive comments or threats. Companies also have to consider employee activity on social media as a potential avenue for harassment.

Employment Practices Liability Insurance helps protect your business against financial costs related to settlement amounts and can cover your eligible legal defense expenses.

Even if a court doesn’t rule against you – litigation can be costly. Workplace rights cases can eat up thousands of dollars in lawyers’ time and other legal costs.
EPLI policies usually — but not always — include retaliation, which accounted for 46 percent of charges alleging discrimination in 2016. We advise policyholders to verify that retaliation is included in your policy. Be aware, too, that the language defining “retaliation” can vary. Be sure you know what is covered.

Know what your policy covers

If you do choose to get EPLI, be sure you understand what the policy covers – and what it doesn’t. For example, EPLI policies do not cover claims brought under the FLSA, OSHA, ERISA or workers’ compensation laws. Before you buy, ask the insurer what types of claims are covered, and whether the policy is a “duty to defend” policy or a “duty to pay” policy.

A “duty to defend” policy gives the insurance company the right to select defense counsel and control the defense of a claim. A “duty to pay” gives the insured the responsibility to handle claims as it sees fit, with the insurer obligated only to reimburse the cost of defense, claim settlements, and judgments. Be sure you understand the advantages and disadvantages in each case.

Most polices have a retroactive date, which means any claims based on actions before the “retro date” are not covered. If you are buying a policy for the first time, negotiate for the earliest retro date you can get. If you switch carriers, you might want to consider “tail coverage” to extend the expiring policy to cover future claims – provided the underlying acts took place before the policy expired. Then the new policy can have a retro date that begins with its inception. Consider giving notice under the expiring policy for potential claims that haven’t been filed yet.

If you have a policy already, now is a good time to carefully review its wording.