What Is Employment Practices Liability Insurance (EPLI)?

    By
    Sakshi Udavant
    Sakshi Udavant headshot
    Sakshi Udavant
    Sakshi Udavant covers small business finance, entrepreneurship, and startup topics for The Balance. For over a decade, she has been a freelance journalist and marketing writer specializing in covering business, finance, technology. Her work has also been featured in publications and media outlets including Business Insider, Chicago Tribune, The Independent, and Digital Privacy News.
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    Updated on December 1, 2022
    Fact checked by Rebecca McClay
    A business owner talks to an employee.
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    Edwin Tan / Getty Images
    Definition

    Employment Practices Liability Insurance (EPLI) covers a business’s legal costs when an employee files a lawsuit. This can include expenses related to lawsuits in which an employee sues for discrimination, harassment, or wrongful termination.

    Key Takeaways

    • Employment practices liability insurance (EPLI) protects businesses from incurring the costs of lawsuits filed by employees.
    • EPLI protects from lawsuits related to issues including discrimination, harassment, and wrongful termination.
    • EPLI covers litigation costs, including lawyer’s fees and settlement money.
    • Directors and officers (D&O) liability insurance, in contrast to EPLI, protects individuals.

    How Employment Practices Liability Insurance (EPLI) Works

    Employment practices liability insurance (EPLI) is designed to protect business owners from lawsuits filed by employees by providing coverage for defense and damages.

    If you’re a small business owner, you may not have the funds to handle costly litigation. In this case, you can purchase EPLI so that you don't face financial hardship if an employee sues the company. EPLI covers expenses such as lawyer’s fees, settlement money, and administrative expenses. However, it does not cover criminal fines, bodily injury or property damage claims, or wage-theft compensation.

    Note

    The insurance applies to claims filed by an employee working for your business, including full-time staff, part-time workers, seasonal contractors, and even former employees.

    EPLI coverage may be available through an endorsement to a business owner’s policy (BOP) or as a stand-alone policy. Several insurance companies Axis Insurance Services, AmTrust Financial, and Travelers offer this type of insurance.

    Example Scenarios When EPLI Provides Protection

    EPLI covers a broad range of lawsuits filed by employees. Here are some examples of situations when your business would likely be protected by an EPLI policy:

    • An employee files a sexual harassment case.
    • A gig worker or a freelancer claims they are being discriminated against.
    • An ex-employee believes they have been fired for the wrong reasons.

    Who Is Eligible for EPLI?

    Every provider has different eligibility criteria for employment practices liability insurance. Typically, most small businesses are eligible to receive the benefits. However, insurance providers may avoid working with businesses that have been involved in numerous previous lawsuits.

    How Much Does EPLI Cost?

    The cost of employment practices liability insurance varies depending on the type of policy, the industry of the business being insured, and the provider.

    Here are some examples of average premium costs cited by different insurance companies:

    • Insureon: $2,185
    • AdvisorSmith: $1,824
    • AP Intego: $1,200

    Insurance providers will consider the number of employees, the inherent risk in the nature of the work, the HR policies your company practices, and the history of claims against the business. Each business pays a different premium depending on their specific situation.

    How To Get Employment Practices Liability Insurance

    Getting employment practices liability insurance has become easier. You can get a number of free quotes online by visiting insurance providers' websites and filling out a short form. Then, you will learn whether the insurance company has approved your application and what terms they will offer you.

    Note

    Talk to your insurance agent to see if you can add coverage to your current policy instead of buying a separate one from a different provider.

    Employment Practices Liability Insurance vs. Directors and Officers Liability Insurance

    Employment Practices Liability Insurance (EPLI) Directors & Officers (D&O) Liability Insurance
    Provides coverage for lawsuits against a business Provides coverage for lawsuits against an individual, such as an officer or director of a company
    Protects companies from losses related to lawsuits Protects individuals from personal losses if they are sued as a result of their director or officer position in a company or nonprofit
    Typically covers losses related to legal fees and court expenses, including administrative expenses Covers legal fees or other costs associated with a lawsuit incurred by the individual, and in some cases by the organization
    Typically excludes criminal fines or claims regarding bodily injury, property damage, or wage theft Typically excludes fraud and criminal offenses

    Both EPLI and D&O liability insurance provide liability protection, but the latter is focused on protecting individuals, or directors and other executives, rather than the business as a whole.

    For example, if a business executive is sued because of their poor decision-making, the D&O liability insurance would provide protection. But if an employee sues the company for age discrimination, the EPLI would provide protection. A combination of the two policy types would provide full coverage.

    Frequently Asked Questions (FAQs)

    What does employment practices liability insurance (EPLI) cover?

    The employment practices liability insurance (EPLI) will typically cover litigation costs when a current or past employee sues your company for harassment, discrimination, or wrongful termination. However, it won’t cover criminal fines, bodily injury, property damage claims, or wage-theft compensation.

    What is directors and officers (D&O) liability insurance?

    The directors and officers (D&O) liability insurance protects the board of directors and company officers against the costs of lawsuits against them. It can be used with the employment practices liability insurance to safeguard the company and its higher-level managers. However, D&O insurance typically does not cover claims of fraud, financial mismanagement, or misconduct.

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    Sources
    The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

    1. Axis Insurance Services. “The Employment Practices Liability Insurance Specialists.”

    2. AmTrust Financial. “Employment Practices Liability Insurance.”

    3. Travelers. “Employment Practices Liability Insurance (EPLI).”

    4. Insureon. “How Much Does EPLI Cost?”

    5. AdvisorSmith. “Employment Practices Liability Insurance.”

    6. AP Intego. “Employment Practices Liability Insurance.”