Employment Practices Liability Insurance
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Claims involving wrongful termination
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Claims filed against companies with fewer than 100 employees
What is EPLI?
Understanding the Financial Risks of EPLI Claims
Employment Practices Liability Insurance can provide financial protection for the legal defense costs, settlements, and judgments arising from claims such as:
Discrimination based on age, race, gender, religion, or other protected characteristics.
Sexual Harassment and hostile work environment claims.
Wrongful termination or demotion.
Retaliation against employees who exercise their rights.
Failure to promote or employ due to discriminatory practices.
Mismanagement of employee benefits or wage and hour claims (though these may require additional coverage).
Who Needs EPLI Coverage?
Employment Practices Liability Insurance is beneficial for any organization with employees. Small and medium-sized businesses, which may lack the resources for dedicated HR departments or legal support, are especially vulnerable to employment claims. EPLI provides critical support, covering the costs of defending claims and ensuring that legal fees do not threaten the company’s financial stability.
Industries with higher employee turnover, such as hospitality, retail, and healthcare, tend to have a higher percentage of EPLI claims relative to their total claims volume. For small and mid-sized businesses in these industries, EPLI claims can make up closer to 15-20% of their total liability claims.
Claims have been increasing over recent years due to heightened awareness around workplace issues like harassment and discrimination. Some data indicate EPLI claims have grown by around 20-30% in recent years, especially following high-profile workplace lawsuits and social movements.
Average Cost Per Claim
- According to data from insurance industry sources, the average cost per EPLI claim can range from $40,000 to $125,000 for small businesses, with defense costs often contributing significantly to this amount.
- The final settlement or judgment may add more to these expenses, with cases that go to trial potentially costing small businesses upwards of $200,000 or more.
Settlements vs Trial Costs
- Approximately 75% of EPLI claims are resolved out of court. For small businesses, settlements can range from $10,000 to $50,000 on average.
- When cases go to court, the costs escalate due to higher legal fees and potential damages awarded, with some claims reaching $500,000 to $1 million or more if punitive damages are involved.
Annual Aggregate Losses
- Industry studies suggest that small to mid-sized businesses can face aggregate EPLI claim losses ranging between $500,000 to $2 million annually, depending on the number of claims and industry risk factors.
- Businesses in industries with high employee turnover, such as hospitality or retail, may see higher aggregate losses due to the increased risk of claims.
Breakdown by Type of Claim
- Discrimination and wrongful termination claims are typically the costliest, with discrimination cases potentially incurring average losses around $80,000 to $150,000.
- Sexual harassment claims also pose significant financial risks, often costing around $50,000 to $100,000 for small businesses
Secure Your Future Today
Don’t wait until it’s too late. Contact MHP Group for a personalized consultation and discover how employment practices liability insurance can protect you and your company.