Employment Practices Liability (EPLI) Policy
A liability policy covering claims by employees against their employer for wrongful employment practices such as discrimination, harassment, and wrongful termination.
What It Is
An Employment Practices Liability Insurance (EPLI) policy covers the employer, its directors, officers, and managers against claims alleging wrongful employment practices. Covered claims typically include discrimination (based on race, gender, age, disability, religion), sexual harassment, wrongful termination, retaliation, failure to promote, breach of employment contract, and wage and hour violations (where covered by endorsement).
EPLI policies are written on a claims-made basis, meaning they cover claims first made during the policy period for employment practices that occurred after the retroactive date. Defense costs may be inside or outside the limit, depending on the policy form.
The policy may cover the company entity, individual managers and directors, and in some forms, employees acting in a supervisory capacity. Third-party EPLI coverage, which protects against claims by non-employees (customers, vendors), is available by endorsement.
Why It Matters for Brokers
Employment practices claims are among the fastest-growing areas of litigation. EEOC charges and private employment lawsuits can result in six- or seven-figure settlements plus significant defense costs. Every employer with employees has EPLI exposure. Brokers who proactively recommend EPLI coverage protect their clients from a significant financial risk and reduce their own E&O exposure. Failing to recommend EPLI to an employer client is an increasingly common basis for E&O claims against brokers.
Real-World Example
A 50-employee technology company faces a wrongful termination lawsuit from a former sales director who alleges age discrimination and retaliation. The lawsuit seeks $500,000 in damages. The company's EPLI policy (with $1M limits and a $25,000 retention) assigns defense counsel and ultimately negotiates a $175,000 settlement. Total defense costs are $85,000. Without EPLI, the company would have paid $260,000 out of pocket.
Common Mistakes
- 1Not recommending EPLI to small employers who believe they are too small to be sued — EEOC statistics show claims are common across all employer sizes.
- 2Failing to add third-party EPLI coverage for businesses with significant public-facing operations like retail and hospitality.
- 3Not coordinating EPLI with D&O coverage when both policies exist, as claims may trigger both and the policies need to work together.
How brokerageaudit.com Handles This
Policy Checker analyzes EPLI policies for coverage adequacy relative to the employer's size and industry, verifying retention levels, defense cost treatment, and whether third-party coverage is included when appropriate.