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The case for EPLI

Management | April 1, 2014 | By:

Don’t assume that a general liability or business owner’s insurance policy will cover you in a lawsuit related to employment practices.

The case for EPLI
Don’t assume that a general liability or business owner’s insurance policy will cover you
in a lawsuit related to employment practices.

A rental business wouldn’t face the risk of fire, theft, customer injury or other catastrophic event without the proper insurance protection.
Surprisingly, it is more likely that a business will be confronted with an employment-related claim than any other type of risk.
While lawsuits related to employment practices are more common than ever, don’t assume that you have protection for these losses through a commercial general liability (CGL) or business owner’s policy (BOP). Typically, these policies expressly exclude employment-related claims. That’s where EPLI comes in.

What is EPLI?
Employment practices liability insurance (EPLI) is another important component in building a complete insurance solution to protect a rental business.
An EPLI policy offers insurance protection against claims and lawsuits brought against a business, its officers, managers or employees and can be filed by employees, former employees and even employment candidates. The most frequent claims are employer retaliation and race and sexual discrimination.
EPLI policy coverage includes the payment of defense costs, damages, judgments and settlement amounts within policy limits, regardless of case outcome. Some insurers provide EPLI coverage as an endorsement to the BOP, while others offer it as stand-alone (monoline) coverage.

Why EPLI is needed
The number of employment-related claims filed through the U.S. Equal Employment Opportunity Commission (EEOC) continues to trend upward. Persistently high unemployment
rates and changing regulatory and enforcement activities are contributing factors.
Adding to the trend is the fact that filing an employment-related charge is simple and free. A claim can be initiated by phone or mail, or filed in person at a local EEOC office.
While filing a complaint is free, the costs to defend a claim, even a frivolous one, are definitely not. As the number of employment-related claims has increased, so has the size of awards. Today, tens of thousands, hundreds of thousands, even awards exceeding $1 million are common.
No business should believe itself
to be immune from employment
practice claims.

Factors to consider
Discuss EPLI with an insurance provider or broker who really understands your rental operation, one who can help you determine the most appropriate, cost-effective way to address the risks and requirements of
your business.
EPLI coverage varies widely both in price and scope. Compare policies carefully to determine the value of the coverage you purchase. Don’t assume the most expensive policy offers the most coverage.
Generally, EPLI coverage can be purchased with limits ranging from $1 to 25 million. Annual premiums are typically in the range of $2,000 to $4,000 for businesses with five to
20 employees.
Look for a policy with a reasonable deductible that provides coverage for acts occurring prior to the inception of the policy (“full prior acts”) and third-party claim coverage that protects your business against legal issues that arise between your business and others, such as vendors or customers.
Considering the amount of coverage EPLI provides your rental business, the price is reasonable. Remember, cost for coverage is just a fraction of what your business could pay if faced with an employment-related claim
or lawsuit.

Preventative approach
Poor employment practices put a rental operation at risk. A preventive approach goes far in mitigating a company’s exposure. All companies, regardless of size, should look at their personnel policies as the first line
of defense against employment-
related claims.
The best protection is to have good policies and practices in place and create a positive workplace culture with zero tolerance for discrimination, harassment and other illegal activities.
Mandatory anti-discrimination training for managers and employees, timely response to employee complaints, and thorough documentation of policies, procedures and actions are among the many ways that businesses can reduce employment-related risk and exhibit good faith in preventing workplace discrimination.

Last line of defense
Employment-related claims will continue to be a significant area of exposure for rental operations. Although the first line of defense should always be a sound employment policy, EPLI coverage can reduce operational uncertainties and be an invaluable lifeline for a rental business when faced with an employment-related claim.

Brian K. Hall is president of USI Affinity Rental Specialties, a provider of comprehensive insurance solutions for rental businesses across the U.S.

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