Something to discuss with your CFO: Employment Practices Liability Insurance (EPLI). But before you do, get the key details about it.
The law firm of Nexsen Pruitt recommends you consider these four questions before making a decision on buying EPLI to protect your company against the expense of employee lawsuits and resulting damages, if any:
Is it cost-effective?
First and foremost, it’s insurance. So, by definition, it’s meant to cover unpredictable, unforeseen events. Given that, you can never be certain if it’s cost-effective – until you use it.
There are circumstances that might give you some clues, however. For instance, if your company is planning a layoff or major reorganization, the likelihood of employee lawsuits goes up. Similarly, if you’re in an industry that traditionally has a high rate of turnover, you’re more likely to get sued by an employee or former employee.
If we already have a lawyer, will the policy cover the services of that lawyer or must we use a designated lawyer?
Different policies offer different options, so you can choose the one that suits your company best. If you typically use a lawyer who knows your company and whose work you regard highly, you can get a policy that lets you select. Other types of policies will pick a lawyer for you from a roster of specialists in employment law.
Do policies cover all types of employment suits?
Most policies cover the usual categories of lawsuits – discrimination, harassment, retaliation, wrongful discharge – and most charges that fall under the federal alphabet soup of FMLA, ERISA, COBRA, etc.
You may find that some policies exclude coverage for charges involving intentional acts by managers, because the punitive damages for such suits tend to be huge.
What’s considered a “claim” under most policies?
Some define the term broadly to indicate almost any type of charge against an employer. Others exclude various administrative proceedings such as one being handled by EEOC or another government agency.
