Reduce Your Company's Risk for EPL Losses

NOVEMBER 7, 2023

Companies of all types and sizes are exposed to the rising frequency and cost of employment practices liability (EPL) claims, but many lack adequate coverage. Contrary to what many business owners believe, EPL claims are excluded under general liability and workers’ compensation policies.

EPL claims can originate from both inside and outside the company, so it is important for policies to address both sets of exposures. While most claims are brought by employees, the number of third-party claims for discrimination and harassment is increasing.

Why Is EPL Coverage Important?

• EPL claims include lawsuits, written demands and administrative charges filed against your company for workplace offenses such as discrimination, harassment, negligent supervision and wrongful termination.
• EPL claim costs typically range between $50,000 and $500,000, depending on allegations, geography and duration.
• Even lawsuits that are ultimately dismissed can cost more than $100,000 to defend.

Common sources of EPL claims include:

Here are some examples that help demonstrate EPL exposures your business could face:

Example 1 — Sexual Harassment & Retaliation Charges

An employee working for a service company alleged that several employees made inappropriate sexual comments towards her, including suggestions that she was having a sexual relationship with another employee. In addition, she also alleged that her boss and coworkers asked her inappropriate questions concerning her personal life. The plaintiff alleged that after she complained, her manager engaged in a practice of retaliation. She contended that she was excluded from certain meetings, taken off certain projects and assignments, treated rudely and received a negative evaluation. The parties participated in arbitration and consented to a settlement of $250,000.

Example 2 — Wage-and-Hour Claim

A recently terminated employee of a car wash alleged that he had been working overtime for several years without being paid, due to a company policy that forbids employees from working overtime. He claimed that he had often worked for 30 to 45 minutes before clocking in, and sometimes worked late after clocking out. The car wash’s EPL policy contained an exclusion for wage-and-hour defense costs, so when the former employee hired an attorney to sue for the overtime pay, the company had to pay for defense out of pocket.

Example 3 — Wrongful Termination & Retaliation Claim

An employee of a manufacturer alleged that their employment had been terminated because they had testified on behalf of another worker who brought a separate action against the company. The employee alleged that this was a violation of their employment contract, which provides that they can only be terminated for good cause. They asserted causes of action for wrongful termination, breach of contract and retaliation. Total defense and settlement exceeded $120,000.

Example 4 — Discrimination & Hostile Work Environment

A service company received a formal complaint from an employee alleging that he had been subjected to a hostile work environment and discrimination during his employment. He alleged his supervisor had made hostile comments about his sexual orientation and contended the supervisor had reduced his sales territory and that he had been treated in a hostile manner during sales meetings.

The plaintiff reported these incidents to the company’s president, who refused to investigate the matter or take any action, though he discharged the employee soon after he filed the complaint. The plaintiff alleged four causes of action: hostile work environment, discrimination based on sexual orientation, retaliation, and intentional infliction of emotional distress. The defense and settlement of this case exceeded $300,000.

USI’s ExecuSafe Coverage

The terms and conditions offered by standard EPL policies create gaps in insurance coverage, which can lead to significant uncovered losses. With USI ExecuSafe, we have negotiated key enhancements to the policies offered by several leading insurers, expanding EPL coverage to a broader scope than can be obtained by most other agents and brokers. Our ExecuSafe partners also offer several risk control tools, typically at no additional cost.