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Employment Practices Liability Insurance (EPLI)

Anticipating a rise in employment-related litigation, some insurers have began offering EPLI policies. These policies are designed to protect against claims that the employer has violated some part of the employment contract implied in the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act of 1964 (Title VII), and so forth.

Such claims usually involve harassment or discrimination of some kind, but also can include wrongful termination, improper treatment, wrongful infliction of emotional distress, or any other alleged violation of the employment contract.

Most EPLI policies will list exclusions from the extent of the coverage. Exclusions often include claims arising from an employment contract and violations of the National Labor Relations Act (NLRA), COBRA, the Worker Adjustment and Retraining Notification Act (WARN), and the Employee Retirement Income Security Act (ERISA).

Punitive damages also generally are excluded. In some jurisdictions, it’s against public policy to insure an employer that’s directly liable for punitive damages, so regardless of the policy language, you must pay those damages out of your pocket if awarded by a judge and jury.

The size and scope of EPLI policies can vary greatly depending on obvious factors such company size, the history of lawsuits against the employer, and the extent of the chosen coverage.

When a claim is filed that is covered under the EPLI policy, the insurer covers the cost of hiring an attorney to defend against the claim. Like with medical insurance coverage, some insurers will allow employers to choose from a list of attorneys approved by the insurer. More often, the insurer will outright choose an attorney for the employer.