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Combine Epli And E&o Insurance For An Airtight Policy
What kind of businesses can benefit from both E&O and EPLI insurance coverage? While errors and omissions insurance is critically important for professional services firms, E&O will not cover all issues that might arise. Professional services firms have professional employees such as architects, engineers, attorneys, consultants and the like. These professionals have high expectations and are more likely to sue when things don’t go as they would like. Strong employment practices liability insurance, or EPLI, can complement errors and omissions insurance to protect your professional services firm from outside and inside litigants.
Employment Claims and EPLI
Employment related lawsuits have steadily increased over the past ten years. This increase in litigation has been mirrored by the increase in the number of firms purchasing employment practices liability insurance, or EPLI. EPLI is designed to protect employers from employment claims issued by potential employees, former employees, or current employees.
EPLI usually covers a variety of claims. A sample of these claims includes wrongful termination, sexual discrimination, sexual harassment, improper emotional distress, and many other types of claims.
Employment practices liability insurance will protect your firm and your managers from litigation from unhappy employees who file claims through local Human Rights Departments, the EEOC, or actually obtain an attorney to sue you. While many companies purchase EPLI as a stand alone, it is more common to combine your employment practices coverage with your D&O or Directors and Officers Liability policy. This way, you can tailor your coverage for the specific exposures of your company. Employment claims are notoriously expensive, and as an employer, you do not want to be stuck with the legal bills. Good EPLI coverage will pay for your legal bills in the case of an employment claim.
The Difficulty of Fighting Employment Claims
Many employment lawsuits come down to one person’s word versus another person’s word. For example, a potential employee might make a claim that he or she was denied a job due to racial discrimination. However, the hiring director might claim that the potential employee simply wasn’t qualified for the job. While these claims rarely go to trial, the amount of effort that must be extended in investigation and developing responses to allegations can be both time consuming and expensive.
The premium insurance companies charge for offering EPLI have gone down over the past ten years. This is due to better risk assessment on the part of insurance company underwriters and a better understanding of what is and is not being claimed in the work place.
There are a variety of factors that affect the cost of EPLI insurance. These factors include the size and scope of the company. Small business that employ between 5 and 20 people are usually billed between $1,000 and $4,000 in annual premium for a $1,000,000. Large companies may face premiums of up to tens of thousands of dollars. Insurance underwriters will evaluate a number of factors when setting prices for insurance companies.
These factors include:
- the size of the company (in terms of sales)
- the number of employees
- the nature of the industry
- a complete claims history
- turnover rates
- hiring/firing practices
- any procedural written policies regarding employment, including the employee handbook.
Stay Covered with EPLI
While companies may have to pay a significant premium for EPLI, the cost of acquiring EPLI is much lower than having to pay for a legal defense, or, worse, having to pay legal damages. Recent lawsuits that pertain to age or sexual discrimination have topped $5 million in damages for moderately sized companies.
Employment practices liability insurance will help you cover your costs in the case of an employment claim. You should build your policy so that it affords you the maximum amount of protection. You can do this by consulting with a knowledgeable insurance agent.
Learn more about errors and omissions insurance and how to include EPLI coverage in your employment policies.
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