What Are Common Exclusions in EPLI Insurance?

What Are Common Exclusions in EPLI Insurance? cover

Employment practices liability insurance (EPLI) is a necessary product for many businesses in today’s litigious world. EPLI protects your business from various kinds of lawsuits brought by current, former or prospective employees. But while EPLI can shield you from the high costs of an employment-related lawsuit, you need to understand its limitations and exclusions.

What EPLI Covers

Available as a standalone policy or as an endorsement on many businessowners’ policies, EPLI typically covers the cost to defend lawsuits as well as judgments or settlements, up to the policy limit, for covered claims. Policies will typically protect your company, along with owners and managers, against many types of employment-related lawsuits, including claims of sexual harassment, discrimination, wrongful termination, failure to promote or hire, retaliation and defamation. Some EPLI policies also cover work-related discrimination or harassment claims brought by non-employees, such as vendors, business partners and customers. As EPLI policies vary widely, it’s important to read your policy carefully to understand what’s covered and what’s not.

Exclusions in EPLI

Like all types of insurance, EPLI has exclusions. Generally, it doesn’t protect you from losses that are covered under other types of insurance. While every policy is different, here’s a look at some of the common exclusions.

Wage-and-Hour Law Claims

Most EPLI policies do not cover claims based on wage-and-hour violations, such as when an employee sues you under the Fair Labor Standards Act for failing to pay them overtime or for misclassifying them as exempt versus nonexempt.

Bodily Injury or Property Damage

Claims that you caused bodily injury, such as assault and battery, or property damage are nearly universally excluded from EPLI policies.

Intentional Misconduct

EPLI policies generally exclude claims arising out of fraudulent or dishonest acts, such as when an employer makes false promises regarding compensation to persuade a prospective employee to leave another job.

Workers’ Compensation, Unemployment and Disability Claims

Workers’ compensation, unemployment and disability claims are excluded from EPLI, since they are covered under other insurance policies.

Labor Disputes

Claims arising from labor relations disputes, such as unfair labor practices under the National Labor Relations Act, are generally excluded from EPLI.

Claims Arising from Other Federal Statutes

EPLI typically excludes claims that you violated certain federal statutes, such as the Occupational Safety and Health Act (OSHA), Employee Retirement Income Security Act (ERISA) and Worker Adjustment and Retraining Notification Act (Warn Act).

Prior Knowledge of a Claim

If, before your insurance policy’s effectiveness date, you had prior knowledge about – or should have known about – a claim or circumstances that could lead to a claim, EPLI will not cover the claim.

Punitive Damages, Fines

EPLI policies typically do not cover punitive damages, criminal or civil fines, or statutory liquid damages. The laws in many states do not allow insurance to cover these punitive measures. The rationale is that if companies are permitted to escape payment for causing intentional harm, these penalties will no longer serve as a deterrent.

As soon as you learn that an employee has made a complaint, it is important to review your policy to determine whether that complaint is or may be a “claim” under the definition of your policy. If it is a potential claim, you are required to notify your EPLI insurer in a timely manner.

If you are involved in a dispute with your business insurance company, contact Schwartz Conroy & Hack. We have the expertise, experience and tenacity to make sure insurance companies keep their promises to you and your business.