Although many employers regularly face employment litigation, employment-related lawsuits tend to increase during a stagnant or faltering economy. At such times, companies of all sizes are exposed to employment practices litigation, which can have enormous defense costs even if a settlement or verdict is relatively low. In order to best insulate themselves from costly verdicts, settlements and defense costs, policyholders should consider and understand employment practices liability insurance (EPLI) policies, including key concepts related to what is and is not covered, who is covered and how EPLI coverage operates.
EPLI policies are relatively new, having been introduced less than 20 years ago. Although an approved ISO form EPLI policy exists, EPLI policies are most often sold as manuscript policies and can have varying coverage terms and exclusions. Because EPLI policies are not uniform, a policyholder must carefully read a proposed policy prior to purchase. The key is assessing whether, based upon the policyholder’s business, the policy will provide coverage for the employment claims that it is most likely to deal with and for whom such coverage will be provided.