Don’t let an off-handed comment ruin your business. Employment Practices Liability Insurance can save your business.
Employment Related Practices Liability Insurance, commonly referred to as EPLI coverage, is a relatively new coverage but is a coverage that any business that has employees must carry. If you have a policy that is over 5 years old you might now have this coverage and your old policy is obsolete.
Imagine an employee uses his office computer to send a joke to a co-worker that has a sexual connotation. Instead of the employee just sending the joke to his friend, he hit reply all and sent it to all members of the staff. A female employee receives the email and is offended and humiliated by the joke. She then files suit against the employer for creating a hostile work environment. Will your current insurance coverage defend you in this lawsuit?
Not unless you have Employment Practices Liability Insurance (EPLI) coverage. For most occupations this coverage can be endorsed to your liability insurance policy, but for other occupations it must be a separate insurance policy.
Common Employee/Employer lawsuits include:
- Sexual Harassment
- Hostile work environment
- Discrimination
- Unfair hiring practices
- Retaliation
- Wrongful termination
- Wage and Hour disputes
The average cost of defense of an EPL claim is $150,000. The average jury award if the case goes to verdict is $325,000 per the Equal Employment Opportunity Commission.
Neither your general liability nor workers compensation policies provide defense or awards issued in Employment Practices claims. The only way to have legal defense or coverage for these claims is to have an Employment Practices Insurance policy or an endorsement to your policy for this coverage.
Who has Employment Practices Liability Insurance Claims?
Per the Equal Employment Opportunity Commission (EEOC)
- A private company is more likely to have an EPLI claim than a general liability or property insurance claim.
- 3 out of 5 employers are sued by former employees.
- 65% of all companies that have ever fired an employee have had a related lawsuit.
- The median compensatory award for all plaintiff verdicts has risen to $325,000. In 2005 it was $250,000.
- Over 40% of all employment practices liability insurance claims are brought against firms with less than 100 employees.
The figures do not include attorney fees. Which the average cost for defense is between $45,000-115,000 depending on the type of claim. You do not have to do anything wrong to be sued. All that needs to happen is for some to accuse you of doing something wrong to start accumulating the attorney’s fees. The EPLI policy will defend you against these false accusations as well.
Did you know? The EEOC receives over 70,000 employment-related complaints each year—and many businesses don’t survive the financial fallout of even one serious claim
The cost of Employment Practices Liability Insurance Coverage has been decreasing over the past 10 years and now the coverage is more affordable then ever? Don’t wait any longer. If you have employees you have a need for this coverage.
First-Party vs. Third-Party EPLI: What’s the Difference?
Many business owners are unaware that there are two types of EPLI coverage: first-party and third-party.
First-Party EPLI
This covers claims made by your employees against your business.
Example Claim:
A long-time employee sues your company for wrongful termination, alleging that they were let go after reporting sexual harassment. Even if your company did nothing wrong, defending the claim could cost over $100,000. EPLI can help cover legal fees and any potential settlement.
Third-Party EPLI
Third-party EPLI covers claims made by non-employees—like customers, clients, vendors, or visitors—who allege your business discriminated against or harassed them.
Example Claim:
A customer with a visual impairment visits your store and alleges that your staff refused to assist them, treating them unfairly because of their disability. They file a discrimination lawsuit. A third-party EPLI policy would help cover the costs associated with this claim.
Real-Life EPLI Claims That Could Happen to You
Claim #1: Age Discrimination
A 62-year-old employee is passed over for promotion in favor of a much younger, less experienced worker. They file an age discrimination lawsuit. The business had documentation of the decision, but still spent over $85,000 defending the case.
Claim #2: ADA Website Violation
A visually impaired customer couldn’t navigate the business’s website and filed a claim under the Americans with Disabilities Act (ADA). The company didn’t have alt text or screen reader compatibility—making them vulnerable to legal action.
Claim #3: Sexual Harassment by a Vendor (Third-Party)
A receptionist alleges ongoing harassment by a contracted IT worker. She files a lawsuit against the business, not the vendor, claiming they failed to protect her. The claim costs the company over $150,000 in legal fees and a settlement.
ADA Compliance and EPLI: A Hidden Risk for Businesses
ADA compliance isn’t just about wheelchair ramps. It’s about ensuring equal access for everyone—including people with disabilities—in both your physical and digital spaces.
How a Non-ADA-Compliant Building Can Trigger an EPLI Claim
Let’s say your building has no ramps or elevators. A disabled job applicant shows up for an interview but can’t access your office. They file a discrimination claim under the ADA. That’s an EPLI event.
How a Non-ADA-Compliant Website Can Also Be a Liability
Now imagine your website lacks:
- Alt text for images
- Keyboard navigation
- Screen reader support
- High contrast text
A visually impaired customer tries to place an order or apply for a job but can’t. They file a claim stating they were denied equal access. Again—EPLI can step in.
Tools Like accessiBe: Protecting Your Business Online
Thankfully, you don’t have to guess whether your website is ADA-compliant. Tools like accessiBe offer website accessibility audits, real-time adjustments, and even plug-ins to help you meet ADA standards.
Benefits of using a tool like accessiBe include:
- AI-driven accessibility adjustments
- Real-time ADA scanning and reporting
- Legal protection support (should you face a claim)
- Compatibility with screen readers and other assistive tech
Keeping your website accessible isn’t just the right thing to do—it’s also smart risk management.
What Does EPLI Typically Cover?
EPLI offers broad protection against a range of employment-related claims. While every policy can vary based on the insurer and your specific business needs, here are the core areas typically covered:
Legal Defense Costs
Even if your business is not found liable, the legal expenses associated with defending a claim can be significant. EPLI helps cover these attorney fees, which can quickly add up whether or not a lawsuit is successful.
Settlements and Judgments
If your business ends up settling a claim or is ordered by a court to pay damages, EPLI can help cover those costs. This includes both financial settlements and awarded judgments related to covered claims.
Claims Filed with the EEOC
The Equal Employment Opportunity Commission (EEOC) investigates complaints of workplace discrimination. EPLI helps cover the cost of responding to and defending against these types of federal investigations.
Retaliation Claims
If an employee alleges they were demoted, terminated, or otherwise mistreated after reporting harassment or another workplace issue, EPLI can provide coverage for the resulting legal action.
Employment-Related Misconduct
Claims involving harassment, discrimination (age, gender, race, disability, etc.), wrongful termination, failure to promote, and more are typically included under an EPLI policy.
Wage and Hour Disputes (Limited)
While not all EPLI policies include this, some may offer limited coverage for wage-related claims, such as employee misclassification or unpaid overtime. It’s important to check the specifics of your policy to know what’s included.
EPLI is designed to help you navigate and survive these potentially business-crippling claims. But like any insurance, it’s only effective if you understand what it covers—and what it doesn’t. Always work with a trusted insurance advisor to tailor coverage to your specific risks.
Industries Most at Risk for EPLI Claims
Any business with employees needs EPLI, but these industries are especially vulnerable:
- Retail – High employee turnover and customer interaction
- Healthcare – Diverse workforce, strict compliance rules
- Hospitality – Constant customer contact and employees working in close quarters
- Construction – Contractor/subcontractor complications
- Tech – Startup culture and casual environments can lead to unintentional missteps
EPLI Coverage Limitations: What’s Not Covered?
While EPLI is broad, there are things it doesn’t cover:
- Criminal acts
- Intentional misconduct
- Breach of contract (not employment-related)
- Unreported claims
- Punitive damages (in some states)
That’s why working with a knowledgeable independent agent is crucial to get the right coverage tailored to your business’s risk profile.
“But We Only Hire Family and Friends…” Why You Still Need EPLI—Including Third-Party Coverage
Many small business owners feel confident skipping Employment Practices Liability Insurance (EPLI) because their only employees are family members or close friends. It’s a common objection—but a dangerous one.
While personal trust may reduce the likelihood of certain claims, it doesn’t eliminate the risks. And crucially, EPLI also includes third-party coverage, which has nothing to do with your internal hiring relationships.
Why You Still Need EPLI, Even with Only Family and Friends on Staff:
1. Personal Relationships Don’t Guarantee Legal Immunity
Disputes can arise over job responsibilities, promotions, pay, or perceived favoritism—even among relatives. And when emotions run high, legal claims can still happen. An EPLI policy helps shield your business from the financial impact of such situations.
2. The Law Treats All Employees the Same
Employment laws don’t offer exceptions for family-run businesses. Whether it’s your nephew or a stranger filing a complaint, the Equal Employment Opportunity Commission (EEOC) investigates all claims seriously.
3. Third-Party EPLI Protects Against External Claims
This is where many business owners overlook a major vulnerability: third-party EPLI covers claims from non-employees—such as clients, vendors, customers, or delivery personnel—alleging harassment or discrimination by your staff.
So, even if you only employ your spouse or your kids, a customer who feels mistreated or discriminated against can still file a lawsuit. That’s a third-party EPLI event, and without the right coverage, you’ll be footing the legal bills alone.
4. ADA Non-Compliance Opens the Door to Claims
If your physical space or website isn’t ADA compliant, you could face a lawsuit from someone outside your organization. That’s yet another example of a third-party EPLI claim that has nothing to do with who you hire—and everything to do with how your business operates.
5. Legal Fees Don’t Discriminate
Even if you’re innocent, legal defense costs add up fast. EPLI helps cover those expenses whether the claim comes from an internal employee or an external third party.
In short: Even the tightest-knit family businesses need EPLI. You’re not just protecting yourself from internal drama—you’re safeguarding your business from the outside world, too. And in today’s legal environment, third-party EPLI might be the most important protection of all.
FAQs: Employment Practices Liability Insurance (EPLI)
1. What does EPLI stand for?
EPLI stands for Employment Practices Liability Insurance. It protects your business from claims related to how you manage employees or treat customers and vendors.
2. What is third-party EPLI coverage?
Third-party EPLI protects your business from lawsuits filed by non-employees, such as clients or customers, alleging harassment or discrimination.
3. Can ADA non-compliance really lead to an EPLI claim?
Yes. If your building or website prevents someone with a disability from accessing your services or job opportunities, it could trigger a lawsuit covered under EPLI.
4. How much does EPLI coverage cost?
The cost varies based on your industry, number of employees, claim history, and risk profile. Small businesses might pay $1,000–$5,000 annually for solid coverage.
5. What steps can reduce EPLI risk?
- Train managers on appropriate workplace conduct
- Implement anti-discrimination policies
- Conduct regular performance reviews
- Use tools like accessiBe for ADA compliance
- Work with an independent insurance agent to fill coverage gaps
Why Choose Huff Insurance?
At Huff Insurance, we understand that every business is unique—and so are its risks. As an independent insurance agency, we’re not tied to one provider. That means we can shop multiple carriers to find you the best EPLI coverage at the best price.
Benefits of Working with an Independent Agent:
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Personalized service tailored to your business size and industry
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Unbiased coverage comparisons across top insurers
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Ongoing risk management support including ADA compliance guidance
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Claims advocacy—we’re on your side when something goes wrong
Final Thoughts
EPLI is no longer optional—it’s essential. From hiring and firing to how your staff treats visitors and how accessible your website is, today’s employers face a minefield of potential lawsuits.
With the right EPLI coverage, real-world claims scenarios don’t have to spell disaster. Protect your business, your employees, and your reputation by partnering with Huff Insurance and ensuring your policies (and your building or website) are compliant and covered.
