Employment Practice Liability Insurance (EPLI): Myths and Facts

EPLI sounds small but the coverage is big. Many business owners don't understand that they are at risk, even if they are family-owned businesses or trust their employees. As a Risk Manager, I would like to recommend and explain the importance of EPLI coverage.

EPLI - Employment Practice Liability Insurance covers employers for defense costs and damages related to claims that arise due to employees' Wrongful Termination, Abuse, Discrimination, Harassment and Retaliation. EPLI claims impact any size organization, including family-based, and can hurt a businesses' financial standing and goodwill. Sometimes claims arise from a third party as well.

Key Factors

Claims Made Form

A Claims Made Form is a core part of an EPLI policy which most clients unaware of. ISO (Insurance Services Office) offers 2 coverage forms, Occurrence and Claims Made. Most professional liability policies, including EPLI, are written under a Claims Made Form. The Claims Made Form covers incidents that are Reported during the current policy period or an extended reporting period whereas an Occurrence form covers incidents that Occurred during or after the policy period.

First Party Coverage

First Part Coverage covers employers for any claims arising from the employees of an organization or business. This part covers claims that arise due to Wrongful Termination, Abuse, Discrimination based on race, color, religion, sex and national origin, Harassment, and Retaliation etc.

Retroactive Date

The Retroactive Date is one of the major terms to understand when a professional liability policy is bought. It defines how far back in time a loss can occur for your policy to cover your claim. If a claim happens prior to your retroactive date, your policy will not cover the claim.

Full Prior Acts

To mitigate any chance of claim prior to the retroactive date, Full Prior Acts feature is scheduled on the policy. This will remove the retroactive date from the policy and covers any claim that arises from the past with no time restriction.

Pending and Prior Date (P&P)

Pending and Prior Date (P&P) is important to understand when switching carriers and especially when there is any pending or prior claims. Many carriers want to avoid covering Pending and Prior claims when they pick coverage and schedule the policy inception date as the P&P Date, so the new carrier is not obligated to cover any reported incidents from prior or pending claims.

Third Party Coverage

Third Party means any customer, client, or other group or natural person other than an Employee or applicant for employment with the Company. This is one of the other major coverage extensions which many employers overlook. Many employers believe the myth that the EPL policy covers claims that arise from first party employees, which is not the fact. EPL policies also cover any claims that arise from third party accusing organizations, businesses, or employees for abuse, molestation, discrimination based on race, color, religion, sex and national origin, and harassment etc. Third party claims are a threat to any kind of business though there are no employees.

Enhanced Coverages

Additional coverages include Immigration Wrongful Act, Wage and Hour claim, Employee Privacy, and many more (please review your policy for more details).

Extended Reporting

Extended Reporting is referred to as Tail End Coverage, which is a great option to report claims even after the policy expires. This policy endorsement is useful when the insured decides to fold the business or organization since there is a possibility of a claim even if the business is closed for good.

To learn more about EPLI, contact Upen at 866-554-6799 today.

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