Wrongful Termination
An employment claim alleging that an employee was fired in violation of law or public policy, covered under EPLI policies.
What It Is
Wrongful termination is a claim by a former employee alleging that their employment was ended in violation of federal, state, or local employment laws, public policy, or an implied or express employment contract. Common legal theories include discrimination-based termination (firing based on protected characteristics), retaliation (firing for reporting illegal activity or filing a complaint), breach of implied contract (violating an implied promise of continued employment), and constructive discharge (making conditions so intolerable that the employee is forced to resign).
Wrongful termination claims are covered under EPLI policies as a core coverage grant. They are among the most common and most expensive EPLI claims, with defense costs averaging $75,000-150,000 and settlements ranging from $50,000 to well over $1,000,000 depending on the circumstances, jurisdiction, and strength of the claim.
The at-will employment doctrine, which allows employers to terminate employees at any time for any legal reason, does not protect against wrongful termination claims when the termination violates anti-discrimination laws, retaliation protections, or other statutory or contractual rights.
Why It Matters for Brokers
Wrongful termination claims are the number one claim type under EPLI policies, representing roughly 35-40% of all employment claims. Every business with employees faces wrongful termination exposure, and the risk increases with employee count, employee turnover, and the absence of documented termination procedures. Brokers must ensure EPLI is in place for all employers and emphasize the importance of proper documentation and HR practices.
Real-World Example
A 75-employee manufacturing company fires a 58-year-old production supervisor and replaces him with a 32-year-old. The supervisor files an age discrimination wrongful termination suit under ADEA. Defense through trial: $185,000. Jury verdict: $425,000 (including $150,000 in punitive damages and $275,000 in compensatory damages). Attorney's fees awarded to plaintiff: $95,000. Total: $705,000. The company's $1M EPLI policy (annual premium $7,200) covers the entire $705,000 after a $15,000 retention.
Common Mistakes
- 1Not recommending EPLI for small businesses (under 50 employees), which are actually the most frequent targets of wrongful termination claims due to lack of formal HR procedures.
- 2Assuming the D&O policy covers wrongful termination—many D&O policies specifically exclude employment practices claims.
- 3Not advising clients to document all termination decisions and maintain consistent application of employment policies to reduce EPLI claim frequency.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker verifies EPLI coverage for all accounts with employees and confirms that wrongful termination is included as a covered claim type. The system flags accounts with high employee turnover rates or recent terminations as elevated EPLI risk. The Submission Intake captures employment practices details that help underwriters assess wrongful termination exposure and price coverage accurately.