Employment Practices Liability (EPL) Insurance
A type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds. The most common exclusions are for bodily injury (BI), property damage (PD), and intentional/dishonest acts. EPLI policies are written on a claims-made basis. The forms contain "shrinking limits" provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy's limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy. In addition to providing directors and officers (D&O) and fiduciary liability insurance, management liability package policies afford the option to cover employment practices liability (EPL).
What is a Fiduciary?
A fiduciary is the person who exercises any discretionary authority or control over the management or administration of an employee benefit plan and its assets. As a fiduciary, you are held accountable to the high standard of a “prudent expert.” This requires you to make educated decisions to benefit your plan participants, as would be expected of expert (in the field investments, for example).
Under the Employee Retirement Income Security Act of 1974 (ERISA), fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of their alleged errors or omissions or breach of their fiduciary duties. This means fiduciaries may be forced to pay for lawsuit defense costs, judgments, and settlements out of their own pockets.
What does a Fiduciary Liability Insurance Policy cover?
Your policy covers defense and settlement costs for allegations of wrongful acts, which may include:
- Breach of ERISA fiduciary responsibilities
- Improper advice or counsel
- Negligent act, error or omission in the administration of any employee benefit plan
- Imprudent investment of assets
- Conflict of interest
- Incorrect benefit calculation
- Misleading representation
- Wrongful termination of plan
- Denial or change/reduction of benefits
- Failure to adequately fund a benefit program
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