Employment Practices Liability Insurance (EPLI)

The threat of a lawsuit hangs over every business transaction, large or small. Even employers who adhere to the letter of the law at all times are likely to be sued by an aggrieved employee or customer at some point. While many suits are groundless, defending against them is costly and time consuming.

If you carry Employment Practices Liability Insurance (EPLI), your business has a measure of protection against lawsuits from current, prospective or former employees who allege discrimination, sexual harassment or wrongful termination. But what happens if a customer sues you for discrimination? Are you protected?

Many employers do not realize that they have a gap in their insurance coverage that leaves them vulnerable to discrimination and harassment lawsuits from customers, clients, vendors, and suppliers. Standard EPLI policies only provide coverage for lawsuits brought about by employees or prospective employees, and most Commercial General Liability (CGL) policies specifically exclude coverage for harassment and discrimination. That’s where third-party EPLI coverage comes in. Where standard EPLI covers claims from your employees, Third Party EPLI covers claims from your customers, vendors, or anyone that interacts with your business and alleges that they experiences discrimination or harassment.

In general, covered claims include the following:

  • Discrimination based on the following:
    • Race
    • Religion
    • Sex
    • Age
    • National origin
    • Disability
    • Pregnancy
    • Sexual orientation
  • The following forms of harassment:
    • Unwanted sexual advances
    • Unwanted requests for sexual favors
    • Other verbal or physical actions that create a hostile or offensive work environment
  • Third-party EPLI is vital for businesses that deal with customers on a daily basis. However, even if you don’t have a lot of interaction with the general public, you may still benefit from third-party EPLI coverage if your operations involve clients, suppliers or vendors. Examples include:
    • An employee files suit for sexual harassment from their manager
    • A customer’s complaints of sexual harassment from other customers are not resolved by management after she reports it