Do You Need Employment Practices Liability Insurance?

Posted November 15, 2022 in Employment Practices Liability

3 Minute Read: 

Employment practices liability insurance is an insurance coverage that protects businesses against losses that might occur when employees file lawsuits against them. This insurance is necessary for every business that hires, manages, and terminates employees. Without it, business owners could risk suffering huge losses defending themselves in court over employee-related disputes. But does your business need employment practices liability insurance? 

Here are the important things to know about this insurance coverage and how it can benefit your business.

If you want to learn more about employment practices liability insurance and how it can help your business manage risks, Gallant Risk & Insurance Services is an excellent insurance service to talk to. Feel free to call us at (951) 368-0700 for all your risk management and insurance needs. 

How Does Employment Practices Insurance Protect Your Business?

Employment practices liability insurance helps with covering your company’s legal expenses when employees file lawsuits over issues such as harassment, wrongful termination, discrimination, breach of employment contracts, invasion of privacy, retaliation, and slander or humiliation, among other employee grievances. The insurance will help cover your attorney’s fees, legal judgments, settlements costs, and other court and administrative costs.

It is important to note that employment practices liability insurance does not cover all employee disputes. 

For instance, your insurance may not cover:

• Alleged workplace injuries
• Criminal and civil fines
• Issues related to unemployment benefits
• Punitive damages
• Damage to an employee’s property
• Wages you are supposed to have paid
• Cases of intentional wrongdoing to an employee

However, the finer details of an insurance policy can vary from one insurance company to another, and therefore, before you can decide to buy employment practices liability insurance from a given insurance company, you need to find out what their particular policy will cover.

Employment Practices Liability Insurance Vs. Commercial General Liability Insurance

Some business owners wonder if it is necessary to buy employment practices liability insurance if they already have commercial general liability insurance. Commercial general liability insurance is designed to protect your business against claims for advertising liability, property damage, or personal injury to third parties arising from your products or business operations. As such, in most cases, commercial general liability insurance does not cover employment practice liabilities. 

Therefore, even if you have commercial general liability insurance, you need employment practices liability insurance to protect your business against losses that might occur as a result of some employee-related lawsuits.

Is Your Business Eligible for Employment Practices Liability Insurance?

Now that you know the extent to which employment practices liability insurance can go in helping your business manage risks, you might be wondering whether your business is eligible for it. 

The good news is that most businesses with employees are eligible for employment practices liability insurance. However, it is important to note that if your company lacks basic human resource policies on issues such as sexual harassment, discrimination, and employment at will, you may have difficulty securing coverage. Businesses that do not conduct periodic employee appraisals and those that have faced numerous employment practices lawsuits in the past may also fail to qualify for this kind of insurance. On the other hand, if your business observes high standards of professionalism in hiring and managing human resources, it should be relatively easier for you to get coverage.

Do I Need Employment Practices Liability Insurance?

The importance of employment practices liability insurance cannot be overstated. This is because the damages awarded in employee-related lawsuits have been increasing over the years. As such, any business that employs one or more people could be at risk of making financial losses that could significantly affect its operation should it find itself facing an employee-related lawsuit. With employment practices liability insurance, you can ensure that the costs of such cases are settled without necessarily interrupting the operations of your business. Therefore, no matter how big or small your business might be, employment practices liability insurance is a necessary risk management solution to have.

If you are looking for more information about employment practices liability insurance or any other insurance needs, please fill out our online contact form.