What is Employment Practice Liability Insurance (EPLI) for Business Owners? (Updated 2024)

 

Photo by The New York Public Library on Unsplash

Author: Andrew Lee
About 3 minutes read.

For business owners and professionals, you are not a stranger to E&O - Errors and Omission Insurance, also known as Professional Liability/Indemnity Insurance (PLI/PII) particularly for professional services, but do you know if it covers Employment Practice Liability (EPL), D&O, and more when you run a business? Probably not.

For those that are interested in starting your own business or start-up, please read on. These are some important information that are critical but neglected easily when people focus on their business.

I hope this article could remind business owners and professionals to review your policy from time to time to make sure you have the appropriate cover especially your policy limits (e.g. damage and defense costs), retention, coverages, etc. and more context on setting up proper insurance for your business's risk management. Further more, whether the insurance company will provide you an attorney when it comes to liability claims.

Why? Simple, Federal, State constitutions, legislations, city ordinances are amended from time to time e.g. California Consumer Privacy Act 2018 or another one AB 5 (aka Gig Worker Bill) that went into effect on Jan 1st, 2020 year. Former one relates not only to liability if customer's Personal Identification Information is leaked due to cyber attack, negligence, or security breach but also giving consumers options to opt-in or opt-out on their personal information holding by you. The later one changes the scope to classify independent contractors and temporary workers and impacted different industries and professionals.

If you hired employees, assistants, independent contractors to assist you, you do want to look into Employment Practice Liability Insurance (EPLI). Quoted from Wikipedia - "Employment practices liability is an area of United States labor law that deals with wrongful termination, sexual harassment, discrimination, invasion of privacy, false imprisonment, breach of contract, emotional distress, and wage and hour law violations". General liability usually does not cover this, nor E&O Insurance. If you have Directors and Officers, you would also want to look into D&O Insurance. I usually recommend professionals research what risk they will face in their field, and consulting with a Labor Attorney upfront. This can assist you to understand what potential claim you may face and the individual scenarios you could encounter. A qualified and certified insurance agent in Property and Casualty (P&C) can also provide general and common guidelines for your industry regarding commercial policies and small business owner policy (aka BOP).

If you plan to provide benefits to your employees (e.g. 401k, 24-Hours Care Coverages which extends Workers' Comp), you may also want to understand if Employee and Fiduciary Liability are for you. A quick reminder, ACA or employer sponsored private health insurance does not cover noon-work related injuries, nor short-term/long-term disability (SDI/LDI) or missed wages, instead, separate disability insurance (SDI/LDI) and Worker's Comp (missed wages) will.

I know this article is loaded with terminologies if you are not familiar with insurances, however, these are good common practice business owners implement to ensure their business assets are protected even they have setup best practices and procedures to prevent themselves from these liability. You can always work with a trusted licensed insurance agent for consultation.

References

Wikipedia EPL - https://en.wikipedia.org/wiki/Employment_practices_liability
What is EPLI - https://www.iii.org/article/what-employment-practices-liability-insurance-epli
Employee and Fiduciary Liability - https://www.irmi.com/articles/expert-commentary/fiduciary-liability-insurance-basics
D&O Insurance - https://en.wikipedia.org/wiki/Directors_and_officers_liability_insurance