Employment Practices Liability Insurance Coverage in New York

Stronger regulations require stronger coverage

New York State and New York City have taken aggressive steps with mandatory regulations to implement stronger protections against workplace harassment after last year’s tsunami of claims, which means new training, revised procedures, and increased urgency for Employment Practices Liability Insurance (EPLI). Not having it puts you one questionable incident or ill-placed joke away from a ruinous lawsuit, as the NYC chefs and restaurants in the headlines attest to.

What is EPLI Insurance?

Employment Practices Liability Insurance covers your business against claims by workers that their legal rights as employees of the company have been violated. Though most of today’s headlines are sexual harassment cases, employment practice liability risks can also include age or race discrimination, wrongful termination, failure to promote, even wrongful infliction of emotional distress. As the number of EPLI claims being filed increases, having EPLI can make the difference between a bump in the road or the end of your business.

What kinds of businesses need EPLI?

The short answer: anyone who has employees. You’re at risk from the day you interview a prospect: if you choose not to hire, he or she could allege discrimination.

Though most suits are filed against large corporations and they generally have substantial policies and procedures in place, the rising number of claims means no company is safe. Small and new companies are exceptionally vulnerable, especially if you don’t have an employee handbook or an HR/Legal department to handle these issues. Often complaints are highest where wages are lowest: 42 percent of women in the restaurant business say they’ve experienced sexual harassment. If the past, chefs, in particular, have been given a long leash when it comes to behavior as long as they keep the dining room full, but that is no longer the case. High-risk industries include:

Restaurants/Food industry
Retail
Science/Tech
Entertainment
Legal
Healthcare
Manufacturing

Typical harassment risks include:

Quid pro quo situations – promotions promised or denied based on a supervisor’s demand for sexual favors
Hostile work environment – including inappropriate jokes or photographs, suggestive comments
Social media – used as a conduit to harassment

Why do I need an EPLI Policy?

It’s not required by law in any state. But it’s the smart move and your first line of defense in a sexual harassment case. Many business owners turn it down because they feel they ‘play by the rules.’ But even the most careful employer, best training, and most comprehensive employee handbook does not account for human nature. Even if you’re innocent, the costs of defending yourself can be catastrophic. Plus, the stigma of being named in a lawsuit and resulting negative press can be enough to permanently damage your brand.

Most claims don't end up in court, but for those that do, the median judgment is approximately $200,000 in addition to the cost of defense. About 25% of cases result in a judgment of $500,000 or more.

How EPLI helps your business

Even the best of intentions and training can fall short. EPLI protects your business and your assets should someone decide you have discriminated against them or violated any of the many employee protection laws. You cannot discriminate against:

Age (over 40)
Color
Disability
Genetic information
National origin
Race
Religion
Sex (including pregnancy)

It is also illegal to retaliate against a person if they complain about discrimination, file a charge, or participate in an employment discrimination investigation or lawsuit. Federal laws apply to companies with 15 or more employees, newer city and state regulations and effective dates vary. HCP can help you navigate through them and recommend a suitable coverage level. Visit the EEOC website for details on all the employment protection laws.

EPLI Quick Facts

On top of navigating new regulations, you need to find the right EPLI policy for your industry. HCP can help: here are some key facts to consider.

Depending on your size, some insurers provide EPLI coverage as an endorsement to your Business Owners Policy (BOP). Others offer EPLI as stand-alone coverage. We’ll help you figure out what makes the most sense.
EPLI policies reimburse your company for the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit.
Employment claims can be made months or years after the alleged incident, so even if you have it now, you could be vulnerable for an incident in the past. EPLI coverage is usually written on a claims-made basis, meaning the incident had to occur during the coverage period.
The policies cover directors and officers, management personnel, and employees as insureds.
Some EPLI policies contain “shrinking limits” which means that insurer payment of defense costs reduces the policy’s limits. This is different than general liability where defense is covered in addition to policy limits.

What EPLI Insurance Covers:

EPLI provides protection against many kinds of employee lawsuits, including claims of:
- Wrongful termination
- Discrimination
- Harassment
- Negligent hiring and supervision
- Failure to hire/promote
- Defamation
- Invasion of privacy
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
EPL covers lawsuits brought on by current employees as well as other possible litigation originators such as:
- Former employees
- Individuals who interview for a position
- Independent contractors
- Customers
- Vendors
What EPLI doesn’t cover
- Punitive damages or civil or criminal fines.
- Liabilities covered by other insurance policies such as workers compensation.
- Bodily injury (BI), property damage (PD), and intentional/dishonest acts.

The top 4 EPLI litigation states are: New York, Florida, California, and Texas.

What are the most common EPLI claims?

The list of potential scenarios if virtually endless, but here are a few to get you thinking.

Interview gone wrong – You’re conducting several interviews for a new position. After making your selection, one of the interviewees sues for discrimination, saying that their skills were an exact match for the position and they were turned down for discriminatory reasons.
Pricing dispute – Three families book rooms at your hotel for the same nights. However, after checking in, the two white families are charged noticeably less than the African American family. Though the discrepancy is blamed on a misinformed employee, the overcharged family sues your hotel for discrimination.
Overlooking federal laws – A veteran enters your grocery store with his service dog, trained to assist with his PTSD. Your manager demands the man and his dog leave as he believes the canine presents a health hazard. The veteran sues for violation of the Americans with Disabilities Act.
Employee error – One of your employees hears an off-color joke and forwards it in an email to another coworker. The recipient but hits the wrong reply button and forwards the email to the entire staff. Though an apology is issued, a small group of employees file a suit against your company claiming they work in a hostile environment, using the email as one piece of evidence.
Contract breach – Your restaurant signs a one-year contract with a supplier, promising they will be their sole product provider. However, six months into the year-long agreement you find a less expensive provider and cancel the contract. The supplier sues you for Breach of Contract. Lesson learned: If someone is involved with your business in any way, they can bring a lawsuit against you.

EPLI claims cos to business. Cost of a policy pales against the cost of a lawsuit: Defense costs can top out at $300,000 and the timeline for resolution can be anywhere from 18 to 24 months for an EPLI claim.

What other coverages might I need?

Property – no matter if you rent, lease or own your own building
General Liability – for claims of injury or damage to property caused by you or your employees.
Professional liability (E&O) – If you offer professional services or regularly give advice to clients.
Workers’ comp – if you have employees
Auto policy – if you have company cars or use your own car for business

EPLI helps against wrongful termination in New York. Companies with high turnover rates are more frequently associated with EPLI claims as disgruntled employees can sue for wrongful termination.

Why should I choose HCP?

We’re entrepreneurs too and we’ll protect your interests as if they were our own. Honig Conte Porrino has worked with New York City businesses of all types and we understand the employee challenges you must overcome to succeed. (We should, HCP has been doing this for more than 100 years!) Whether you’re a retailer or restauranteur, HCP has the expertise to help you every step of the way.

We’ll pair you with an agent who specializes in your business and can coach you on how to protect against the risks you face. In addition, many of our employees have worked with us 15, even 25 years, and make their careers here. You get to work with the same person year in, year out. No need to initiate someone new to how your company works.

EPLI Statistics: Only a quarter of companies who could benefit from an EPL policy actually purchase one.

EPLI insurance in New York