In today’s world, business owners can’t be too careful when it comes to taking steps that actively protect their employees and themselves from lawsuits. The truth for most companies is that if they are around long enough, somewhere along the lines an employee will be wronged or offended. Sometimes this can be a very hard thing to understand and work through. If an employee allegation ends up in a lawsuit, which often happens, it can be extremely problematic and financially damaging.
One of the most unfortunate things about running companies that are led and operated by people is that there is no way of ultimately mitigating negative situations from happening. Somewhere along the line, a real offense could happen, and if it does, how is that company set up to deal with a lawsuit? That’s where EPLI insurance comes into play.
EPLI insurance is a tool that helps companies by providing a shield that protects them from the financial burden of a lawsuit if one were to arise from an employee.
If you have been wondering about EPLI insurance, what it is and who it’s for – here is everything you need to know!
EPLI insurance stands for Employment Practices Liability Insurance, and in a nutshell, it protects a company from having to suffer due to the actions of an individual employee. This kind of insurance helps companies be protected in the case of financial instability due to an employee allegation that results in a lawsuit. The truth is, when it comes to the world business it’s not a question of ‘if’ an allegation will happen against the company, but more of a matter of when.
EPLI insurance acts as a tool to help companies deal with unfortunate situations in a way that won’t place them in financial jeopardy. If you aren’t familiar with EPLI insurance, it’s good to understand what it is not meant to be used for as well as what it can be used for.
One of the most important facets of EPLI insurance that needs to be understood is that this is not insurance that allows or protects negligence. In the corporate world, a lawsuit can arise from any number of situations or causes. Sometimes these allegations are faultless and they do not stand in a court of law. Other times, there is merit to the allegations and a lawsuit is won in favor of the prosecution, which oftentimes results in some kind of financial settlement.
As unfortunate as it is, employee allegations against their own companies are not uncommon. This is actually a good thing to some extent because it can help bring ethical problems to light. While EPLI can help a company not be put in financial jeopardy because of a lawsuit, it is in no way protection against negligence.
What that means, is that in order to attain EPLI insurance, companies have to show that they are actively trying to reduce the risk of an employee allegation. The fact remains that even with the best HR departments and contingency plans, some companies can still inadvertently offend an employee or even violate the rights of an employee. This can occur because of a blind spot the company is unaware of, a mistake or accident that caused offense, or even because the company hired one person that ended up not sharing the same values and made poor choices.
In these cases, EPLI insurance can protect the company financially, but only companies that show they are putting the work and effort in to prevent these situations before they happen will apply for EPLI insurance. This is an important part of the process because EPLI insurance is meant to protect companies that actually need the chance to recover so they can fix the problem, and not protect companies that are actively perpetuating the problems.
The simple answer here is, no. Even if your company has wonderful HR policies, an incredible workplace environment, and a high rating for employee satisfaction, this insurance is still necessary. Lawsuits can happen in unprecedented and surprising ways. The good news is that if you do run a company that is doing everything it can to mitigate these situations before they arise, you have a great shot at acquiring a lower premium.
For companies with a lot of employees, this kind of insurance is important simply because the more employees you have, the more chances for one person to do something wrong and offend or violate another person’s rights. For smaller companies, the importance of EPLI can not be overstated enough, as they may not have the financial stability to withstand a lawsuit.