Do You Have EPLI Coverage?

Do You Have EPLI Coverage? by Alan Krystal

{3:00 minutes to read} It’s a letter that no employer wants to receive—that letter from a lawyer retained by a recently discharged employee, alleging that the employer’s termination was the result of a discriminatory practice—threatening immediate legal action if the employer does not financially resolve the matter to the employee’s (and attorney’s) satisfaction.

Even if an employer believes the ex-employees claim to have no merit, that letter nonetheless creates a stressful situation, especially if the employer is not covered by Employment Practices Liability Insurance (EPLI). Not having EPLI insurance means that the employer will need to retain an attorney to defend the claim, and bear all legal costs, which can become quite substantial if the matter proceeds to discovery, depositions, and trial. An employer without EPLI coverage could very well prevail at trial, but nevertheless, sustain adverse financial consequences as a result of out-of-pocket defense costs. That type of scenario often results in an employer being forced to settle a claim in order to “cut their losses.”

The Upside

EPLI covers an employer for alleged wrongful acts arising from the employment process, including:

  • Termination;
  • Discrimination;
  • Sexual harassment; and
  • Retaliation.

In addition, EPLI policies can cover claims from a variety of other types of inappropriate workplace conduct, such as:

  • Defamation;
  • Invasion of privacy;
  • Failure to promote or deprivation of a career opportunity; and
  • Negligent evaluation.

EPLI covers actions by company directors and officers, management personnel, and employees.

The Downside

The downside of an EPLI policy is that it is subject to a deductible, which is the amount the employer must pay in the event of an employment lawsuit before the insurance company starts paying. The EPLI deductible amount includes attorneys’ fees.

EPLI policy deductibles can be significant depending on the carrier and the size of the business. However, they also provide the employer with a sense of cost certainty and the security of knowing that he or she will not bear the expense of protracted litigation, settlement, or a judgment (provided the judgment does not exceed the coverage limits).

Every business owner should be exploring the option of EPLI coverage with their insurance professional so that they have the facts necessary to make an informed decision. EPLI coverage can prevent an employer from sustaining a potentially catastrophic financial loss and can alleviate the stress and business distraction that often accompanies this type of litigation.

Alan Krystal


Alan Krystal

Alan H. Krystal, P.C.
631 780 6555