EPLI is a type of liability insurance that covers wrongful acts arising from the employment process.
Types of claims covered include:
- Wrongful termination
- Sexual harassment
- Invasion of privacy
- Failure to promote
- Deprivation of a career opportunity
- Negligent evaluation
Who is covered:
- Directors and Officers
- Management personnel
- Employees as insureds
The most common coverage exclusions:
- Bodily Injury (BI)
- Property Damage (PD)
- Intentional dishonest acts
EPLI policies are written on a claims-made basis and the forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs reduce the policy’s limits. This approach contrasts commercial general liability (CGL) policies in which defense costs are typically covered outside, or in addition to, the policy limits. Although EPLI is available as a stand-alone coverage, it is often sold along with management liability policies such as the Directors & Officers Insurance (D&O).
Third-party employment practices liability coverage
A separate insuring agreement contained within EPLI polices that covers liability claims brought by nonemployees against employees of the insured organization is third-party employment practices liability coverage. This coverage is needed because CGL policies typically exclude coverage for harassment and discrimination-the two causes of action most likely to be alleged claims by third parties.
Typical third parties include:
A firm’s exposure to third-party liability claims is driven largely by the extent to which its operations involve contact with the public.
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