EPLI Insurance Vs. Professional Liability Insurance: How Are They Different?

What Is Employment Practices Liability Insurance (EPLI)?

EPLI covers the cost of lawsuits (including defense fees and court judgments) brought against your company by disgruntled employees. These can be your current, former, or prospective workers unhappy with your employment practices.

Statistics show that discrimination lawsuits against employers have increased 400%. For financial protection against such legal actions, you need to have employment practices liability insurance. Other issues that EPLI policies cover include:

• Wrongful termination claims
• Discrimination based on gender, age, disability, etc
• Sexual harassment
• Hiring/job promotion issues
• Privacy breach
• Defamation

EPLI doesn't cover the following:

• Fraud, crime, or malice
• Contractual liability
• On-the-job worker injuries
• Unemployment claims
• Punitive damages

EPLI premium rates usually vary by various factors, including workforce size, industry, turnover rates, and claims history. On average, small businesses with less than 20 staff members and revenue under $500k may pay about $1,824 per year. This cost is for a $500k EPLI coverage with a $2,500 deductible.

What Is Professional Liability Insurance?

This policy covers court judgments and legal defense costs when a client sues your company over issues related to a service you offered. You should have this coverage if you provide a service such as dental care, financial consultation, healthcare, or legal. It can pay for a client's financial loss attributable to issues like substandard work on your part.

Also known as errors and omissions, professional liability insurance covers client complaints/claims such as:

• Work oversights
• Services not delivered
• Substandard work
• Negligence

  However, E&O coverage excludes the following:

• Customer injuries or property damages
• On-the-job employee injuries
• Theft or damage to business property
• Employee discrimination lawsuits

E&O insurance costs vary due to multiple factors, including industry, business size, and how likely you are to be sued for professional negligence based on your past claims history. The median cost for this coverage is about $713 a year for a small business.

Is EPLI the Same as Professional Liability?

As a business owner, you should consider getting both EPLI and E&O insurance as the two policies differ in terms of covered risks. EPLI addresses liabilities from employees' claims, while E&O covers liabilities arising from clients' claims.

Other EPLI Considerations

• EPLI policies are claims-made, meaning that a claim's validity is contingent on the claim-causing event and the filing of the claim during the policy's active period.
• EPLI defense attorney costs reduce the limit of liability.
• EPLI includes a deductible that you should pay toward settling a claim or satisfying a judgment before your policy kicks in.

Tips to Reduce EPLI Claim Risk

By minimizing the risk of being sued over poor employment practices, you can reduce your EPLI costs. Consider implementing these EPLI claim prevention measures:

• Write all company employment policies and procedures in an employee handbook. Keep the details up to date.

• Provide clear job descriptions for each position, defining expectations for all roles.

• Review your staff's performance regularly. Document the evaluations for each employee and keep the information in an employee file.

• Avoid hiring unqualified staff by conducting thorough pre-employment screening and background checks for all candidates.

These are the key differences between employment practices liability and professional liability insurance. It's important to include both coverages in your commercial insurance protection. If you need help finding a solid insurance coverage for your business, contact our experts at Spotlight Insurance Agency today.