The Directors and Officers (D&O) insurance policy can cover employment practices Liabilities if the extension has been purchased. Employment Practice Liability Insurance (EPLI) is the name of this extension. All D&O insurance cover claims made by employees on officers. However, unless you have an EPLI extension, employment claims made on the company will not be covered. Fighting against an employee-related lawsuit can cause financial and reputational loss to the company. The employer can avail of this coverage as an extension under the Directors and Officers liability insurance policy.
Wrongful employment practices such as unfair termination, discrimination, sexual harassment, retaliation, workplace harassment, breach of employment contract, etc. can result in litigation that places great strain on a business. Employee practices liability (EPLI) coverage under the Directors and Officers liability policy is a way to manage and survive during such eventualities and mitigate the risk of facing an employee-related lawsuit against the company. Hence, employee practices liability insurance cover is an important layer of risk management available in D&O policy.
How EPLI can protect from claims
A working employee might sue the company for wrongful termination and breach of an employment contract. A former employee may sue you for sexual harassment or an applicant for employment may file a case against you. The possibility of such claims is high these days, because of highly educated and litigious employees. It will be better for you if you prepare for such contingencies beforehand through protective and reliable plans. The EPLI coverage helps you to settle the claim. It reimburses the defense cost and also any court awards.
In most of the directors’ & officers’ liability insurance, EPLI coverage has to be bought as an extension at a small premium. But one needs to check if your insurance policy is already providing this coverage. You can also buy EPLI as a stand-alone policy. So, if there is a high risk of facing employee-related lawsuits, you can also consider buying the Employee Practices Liability Insurance policy from an insurance provider.
Employee practices liability claims will be covered up to a certain percentage of the sum insured by your D&O insurance.
When deciding on buying Employment Practice Liability Insurance (EPLI), it is essential to consider the policy coverage, exclusions, limits, deductibles, and premiums. Additionally, it is important to evaluate the insurer’s reputation, experience, and financial stability.
XYZ Tech Ltd has bought a Directors and Officers Liability Policy which includes EPLI coverage. A former employee recently filed a defamation case against the firm. He has accused the management of making wrong statements about him. He states that the management has intentionally made false statements about him in order to damage his reputation. Accordingly, he has fewer new job opportunities. In this case, the firm felt that it had done no wrong and the company had to fight the case in order to safeguard its reputation. In this case, the company’s D&O insurance policy with EPLI paid the defense cost and settlement fees. Consequently, the company saved about Rs 10 lakhs in legal fees.
In summary, it is your responsibility to stay prepared for such eventualities. Do follow every possible step to maintain a good working environment in your firm. 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. So, the next time you are buying directors and officers liability cover, also keep an eye on its EPLI coverage section in order to get complete risk protection against lawsuits.