Introduction

In today’s complex employment landscape, businesses of all sizes face significant risks related to their workforce. From allegations of wrongful termination and discrimination to claims of harassment or retaliation, employment-related lawsuits can be financially devastating and damaging to a company’s reputation. Employment Practices Liability Insurance (EPLI) has become an essential safeguard. This checklist will guide you through the key considerations for evaluating, purchasing, and managing an EPLI policy to protect your organization.

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Part 1: Pre-Purchase Assessment & Policy Evaluation

Before you buy or renew a policy, conduct this internal and external review.

Understand Your Exposure:
– [ ] Company Profile: Analyze your number of employees, turnover rate, and history of past claims.
– [ ] Industry Risk: Is your industry prone to higher litigation (e.g., healthcare, finance, hospitality)?
– [ ] Geographic Location: Consider state and local employment laws, which can vary widely in strictness.

Policy Coverage & Limits Checklist:
– [ ] Core Covered Claims: Ensure the policy explicitly covers:
– Wrongful termination
– Discrimination (based on sex, race, age, disability, religion, etc.)
– Sexual and workplace harassment
– Retaliation
– Failure to promote or hire
– Breach of employment contract
– Wrongful discipline
– Deprivation of career opportunity
– Negligent evaluation
– Invasion of privacy
– [ ] Defense Costs: Are legal defense costs covered outside the policy limits (defense outside limits) or do they erode the total amount available for a settlement (defense inside limits)? *Outside is preferable.*
– [ ] Policy Limits: Are the per-claim and aggregate limits sufficient for your risk profile? Consider both the potential settlement/judgment and high cost of defense.
– [ ] Deductible/Retention: Is the amount manageable for your cash flow? Understand if it applies per claim or in the aggregate.

Key Definitions & Scope:
– [ ] Who is Insured? Coverage should extend to the company, its directors, officers, employees, and possibly former employees.
– [ ] Who is a Claimant? Definition should include current, prospective, and former employees.
– [ ] Claim Definition: How is a “claim” defined? Does it include administrative charges (EEOC, state agencies)? Insisting on “right to investigate” upon receipt of an administrative charge is crucial.
– [ ] Prior Acts Coverage: Is there coverage for wrongful acts that occurred before the policy inception date (provided the claim is made during the policy period)?
– [ ] Third-Party Coverage: Does it cover claims from non-employees (e.g., clients, vendors, customers) for harassment or discrimination?

Exclusions Review (Critical Step):
– [ ] Carefully review all policy exclusions. Common ones include:
– Criminal or fraudulent acts
– Bodily injury/property damage (covered by other insurance)
– Contractual liability
– ERISA violations
– Wage and hour disputes (often excluded; sometimes available as a costly endorsement)
– Workers’ compensation claims
– Claims arising from pending or prior litigation
– Known circumstances that could lead to a claim

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Part 2: Implementation & Risk Management Integration

An EPLI policy is not a substitute for good practices. Use it as a tool to reinforce your risk management.

Proactive Human Resources Foundation:
– [ ] Updated Handbook: Maintain a legally reviewed employee handbook with clear anti-discrimination, anti-harassment, and complaint procedures.
– [ ] Training: Conduct regular, documented training for managers and employees on EPLI-related topics.
– [ ] Consistent Documentation: Implement standardized processes for performance reviews, disciplinary actions, and terminations.
– [ ] Clear Hiring/Firing Protocols: Ensure all employment decisions are based on documented, job-related criteria.

Policy Management & Claims:
– [ ] Designate a Point Person: Assign responsibility for EPLI policy management and carrier communication.
– [ ] Claims Reporting Procedure: Establish a clear, internal process for immediately reporting any potential claim or administrative charge to the insurer. *Timely notice is a critical condition of coverage.*
– [ ] Carrier Partnership: Understand your carrier’s preferred legal defense network and their role in selecting counsel and managing the defense.
– [ ] Settlement Control: Review the policy terms regarding who has authority to settle a claim (carrier, insured, or consent required).

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Part 3: Annual Review & Renewal Checklist

EPLI needs evolve. Review annually with your broker, HR, and legal counsel.

– [ ] Benchmark Coverage: Compare your policy terms, limits, and premiums against market offerings.
– [ ] Update for Growth: Have you added employees, entered new states, or changed operations? Inform your carrier.
– [ ] Analyze Claims History: Review any incidents or claims from the past year. Discuss loss prevention strategies.
– [ ] Re-evaluate Limits: Are your limits still adequate given company growth and the current legal environment?
– [ ] Review Risk Management: Assess the effectiveness of your training, documentation, and HR protocols. Share improvements with your insurer, as this may positively influence premiums.

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Conclusion

EPLI is a critical component of a modern corporate risk management program. It provides a financial backstop and access to expert legal resources when employment disputes arise. However, the most cost-effective strategy is to prevent claims altogether. By using this checklist to secure robust insurance and committing to strong, fair employment practices, you create a dual shield that protects your employees, your leadership, and the long-term health of your business.

Disclaimer: This checklist is for informational purposes only and does not constitute legal or insurance advice. Consult with qualified legal counsel and a licensed insurance broker or agent to address your organization’s specific needs and circumstances.