Yes, EPLI can be covered under the Directors and Officers (D&O) insurance policy. EPLI, also known as Employment Practices Liability Insurance, is a claims-made policy which reimburses defence cost and settlement cost incurred by an employer against fighting employee-related lawsuits. An employee can make or break the organization and be fighting against an employee-related lawsuit can cause financial and reputational loss. This coverage can be availed by an employer as an extension under directors and officers liability insurance policy.
Legal cases such as wrongful termination, discrimination, sexual harassment, retaliation, workplace harassment and breach of employment contract etc can put a great strain on a business. Employee practices liability (EPLI) coverage under directors and officers liability policy is a means to survive during such eventualities and mitigate the risk of facing an employee-related lawsuit. Hence employee practices liability insurance cover is an important layer of risk management available in D&O policy.
A working employee might sue you against wrongful termination and breach of an employment contract or a former employee may sue you against sexual harassment or an applicant for employment may file a case against you. The possibility of happening such claims are high these days, because of highly educated and conscious employees. It is better to be prepared for contingencies and have a protective and reliable plan to handle such cases. The EPLI coverage helps you to settle the claim and reimburses the defence cost.
In most of the directors and officers (D&O) liability insurance, EPLI coverage is available by default. But one needs to check which all insurance companies are providing this coverage. If your D&O liability policy is not providing this coverage, you can take this coverage as an extension by paying the marginally extra premium. It is also a stand-alone policy so if there is a high risk of facing employee-related lawsuits, one can also consider buying the Employee Practices Liability Insurance policy.
Buying EPLI as a standalone policy provides broader coverage as D&O policy will only cover top level management but standalone EPLI provides coverage even for the lower level of employees. Employee practices liability claims will be covered up to the certain percentage of sum insured limit in D&O insurance.
Case Study: XYZ Tech Ltd has bought the Directors and Officers Liability Policy which includes EPLI coverage. A former employee has filed a defamation case against the firm. He has accused the management of making wrong statements about him. The false statements about him are intentional in order to damage his reputation which has turned down his new job opportunity. In such case, the firm has no idea about the wrongdoing on its part. But the director has to fight the case in order to safeguard his reputation. In such case, a company’s D&O insurance policy with EPLI cover provides defence cost and settlement fees.
It is your responsibility to stay prepared for such eventualities and try every possible measure to maintain a good working environment. It is a good practice to have an employee handbook or a legal representative for your firm in order to avoid the occurrence of such events. But it is equally important to have EPLI cover in your D&O policy as it is a risk mitigation solution. Next time, you are buying a directors and officers liability cover, also keep a check of EPLI coverage in order to get complete risk protection against lawsuits.