Tag: Insurance

Employment Practices Liability Insurance (EPLI) is evolving rapidly in 2025, driven by technological advancements, regulatory changes, and shifting workplace dynamics. Below are the key trends shaping the EPLI landscape this year:

1. Increased Focus on Artificial Intelligence (AI) in Hiring

The use of AI in hiring processes is a double-edged sword. While AI can streamline recruitment, it also introduces risks of bias and discrimination. For example:

• The Equal Employment Opportunity Commission (EEOC) settled its first AI-related discrimination case in 2023, where an employer’s AI system rejected older applicants, resulting in a $365,000 settlement 
• States like New York and Colorado have enacted laws requiring employers to audit AI tools for bias, and federal frameworks like the Department of Labor’s AI & Inclusive Hiring Framework are guiding employers on mitigating algorithmic discrimination risks 

In 2025, businesses using AI must implement safeguards, such as regular bias audits and human oversight, to avoid litigation and EPL claims 

2. Stricter Workplace Harassment Regulations

The EEOC’s updated workplace harassment guidance, effective since April 2024, has expanded protections for employees. Key updates include:

• Broader definitions of sexual harassment to include LGBTQI+ workers and pregnancy-related conditions.
• Recognition of online harassment in remote work environments, such as inappropriate comments during video meetings or offensive imagery visible in virtual settings 
• Clarifications on balancing religious expression with protections for other employees 

These changes mean employers must update their anti-harassment policies and training programs to remain compliant and reduce EPL risks 

3. Pay Transparency and Wage Equity

Pay transparency laws are gaining momentum, requiring employers to disclose salary ranges in job postings and provide wage data to employees. This trend aims to address pay inequality and promote fairness:

• Colorado pioneered pay transparency laws in 2019, and many states have followed suit, with more legislation expected in 2025 
• The EEOC has included equal pay initiatives in its Strategic Enforcement Plan for 2024-28, signaling heightened scrutiny on wage practices 

Employers must ensure compliance with these laws to avoid claims related to wage discrimination and inequity 

4. Rising EPL Claims and Settlements

Recent high-profile settlements highlight the growing financial risks of EPL claims:

• Mastercard settled a $26 million lawsuit in January 2025 over allegations of systemic underpayment of women and minorities 
• Social inflation is driving higher court awards, making EPLI coverage more critical for businesses of all sizes 

Employers should review their EPLI policies to ensure adequate coverage for emerging risks, including retaliation claims and wage-and-hour disputes 

5. Regulatory and Legislative Changes

New laws and executive orders are reshaping the EPLI landscape:

• The Pregnant Workers Fairness Act (PWFA) and expanded protections for contractors and vendors are increasing employer liability 
• Restrictions on Diversity, Equity, and Inclusion (DEI) programs within federal agencies and contractors are creating compliance challenges 

Employers must stay informed about these changes and work with legal counsel to navigate the evolving regulatory environment 

Conclusion

In 2025, employment liability protection insurance is more critical than ever as businesses face new risks from AI, stricter harassment laws, pay transparency requirements, and rising claims. Employers should:

• Conduct regular audits of workplace policies and AI tools.
• Update anti-harassment and pay equity practices.
• Secure robust EPLI coverage to mitigate financial and reputational risks.

By staying proactive, businesses can navigate these challenges and foster a compliant, equitable workplace. (You.com)

Burr’s- 4 Need to Knows of Employment Practice Liability Insurance (EPLI)- What is it EPLI?

There are a variety of insurance policies and coverage on the market today for organizations, worker’s compensation, business, employee’s, vehicles, etc.  You can insure just about anything (within reason).  What about business insurance for a what if situation related to discrimination?  Does insurance like this exist?  What is employment practice liability insurance (EPLI)?  EPLI is a specialized insurance designed for organizations to protect against losses incurred in litigating and settling wrongful employment practice liability claims.  This insurance provides protection against a what if scenario; discrimination, breach of contract and wrongful discharge lawsuits.  Many times, these lawsuits are not covered under general business liability insurance.  EPLI is generally structured as gap insurance for the organization.  “Directors’ and officers’ liability insurance only protects the individual and not the company itself. EPLI is most commonly designed to fill this gap in coverage. It generally provides reimbursement for the costs incurred in defending a lawsuit but does not cover reimbursement for any penalties suffered.” [i]

[i] https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatisemploymentpracticesliabilityinsurance.aspx

The four factors of employment practice liability insurance:

1. Cost of EPLI:  This will be dependent upon the size of the organization, type of industry/business and other risk factors; previous issues, employment practices, etc. 
2. Relevancy to Organizations: EPLI continues to grow in popularity as employment lawsuits have also grown in popularity and filing charges with agencies has become much easier with the advent of the Internet and through social media communications.  Organizations are not prepared to absorb the risk of loss from such lawsuits, claims and settlements.  Don’t assume, “this can never happen to our organization.”
3. Evaluation of Policies: Organizations should work with current insurance providers to review the scope of coverage and adequacy of limits.  “They should understand who controls the claims handling process-the insured or insurer.  Selection of an appropriate policy for your company’s needs can be difficult and should be carefully considered.”[i]  Do your homework and be prepared to ask questions and fully understand the EPLI policy and processes involved, if a claim is filed.  Your organization will be paying the premium, you need to fully understand what you are paying for and how this insurance will impact the organization in relation to a what if scenario. 
4. What Will Insurance Companies Look For: Many insurance companies will not insure a company unless there are basic and sound employment practices in place.  “Employee handbooks, post-incident investigation practices, and arbitration or mediation policies are some of the major items that insurance companies expect an employer to have when applying for an EPLI policy. You should be prepared for the insurance company to scrutinize all of the HR functions. Also, recent employment lawsuits, size of company, geographic location, and type of business or industry all affect the availability and cost of insurance.”[ii]

Insurance is there, in the event we have a need or a claim.  Is it worth taking a risk and not having Employment Practice Liability Insurance?  Our goal as leaders should be to eliminate the need for the EPLI.  This does not mean not purchasing an insurance policy; simply put, we need sound employment practices and consistency throughout the organizations.  Do your research and fully understand what your organization needs in EPLI coverage.  Look at more than one insurance provider and seek out multiple quotes.  Work with a team and/or board of directors to ensure the best decision is made.  If you have questions, seek guidance.  Insurance is complex and employment lawsuits/settlements can have a major impact on organizations of any size.

Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Businessowners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a stand-alone coverage.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

• Sexual harassment
• Discrimination
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee benefit plans

I highly recommend a thorough review of any employment practices liability insurance as the organization evolves. 

10 Important Facts about Employment Practices Liability Insurance

1. Wrongful acts (as defined by the policy) are typically included for coverage. Intentional acts are generally excluded from EPLI coverage.
2. Wage and hour damages are excluded from EPLI unless they are explicitly endorsed for inclusion. Even so, there is a sub-limit for defense cost coverage for wage and hour claims, which is usually not more than $100,000.
3. Punitive damages, which generally exceed simple compensation and is awarded to punish the defendant, can be considered as part of optional coverage under EPLI. However, it is important to note that coverage of punitive damages is subject to state law. In states such as California, for example, EPLI insurance does not typically cover punitive damages. It is important to review the exact policy wording to be used.
4. The insurance company is usually responsible for selecting the attorney who will defend the lawsuit on behalf of the employer. The attorney is typically chosen from a pre-selected panel of approved attorneys, all of whom specialize in employment law, specifically liability insurance (EPLI). In some cases, the employer’s counsel may be selected if the choice of counsel was approved by the carrier beforehand.
5. EPLI policies typically include self-insured retention (SIR) instead of a deductible. A SIR is an amount that the policyholder will have to pay out-of-pocket for defense costs and losses during the early stages of an employment liability insurance claim before the insurer is required to pay anything. The SIR differs from the deductible. A deductible is subtracted by the insurer from its total claim payment, which then becomes the responsibility of the policyholder.
6. An EPLI claim is usually initiated by a written demand for relief, or when charges are brought before an agency such as the EEOC. Claims may also be initiated by the serving of a summons or a lawsuit, or as part of a regulatory investigation. If a claim is not reported when it is first initiated–or within the time frame specified in the policy–there may be a denial of the claim for coverage.
7. Employment practices liability insurance policies often include a provision known as a “hammer clause”. This clause states that if the insured does not agree to the first settlement opportunity recommended by the carrier, the carrier’s liability may be capped at the amount for which the claim could have been settled. The defense costs up to the date of the settlement opportunity will also be included in the liability.
8. Breach of contract is usually excluded from coverage unless it is related to other allegations. The reason for this is that there is an assumption that the terms will be carried out if and when the insured enters into a contract. If the terms are not carried out, the assumption is that the company violated the contract intentionally.
9. The policy form will indicate “claims made” instead of “occurrence”. This means that the policyholder is only eligible to receive benefits if they are covered at the time the claim is filed with the insurance carrier.
10. It is advisable to notify the carrier of any facts that have surfaced that may require the filing of a future practices liability insurance (EPLI) claim, but for which no claim currently exists. Putting the carrier on notice of an unrealized possibility of a claim does not typically affect the cost of the policy renewal. However, such a notice can secure important protections under the policy in the event that an employment practices liability insurance (EPLI) claim is made at a future date. (Vantreo)

Consideration 1: Risk Management

In determining whether or not to procure an EPLI policy, an employer should initially focus on its internal policies and procedures to assess its risk. An employer should audit its policies and practices; assess the quantity and quality of its training programs; review its claims history and recordkeeping; and consider the history and number of plaintiffs’ verdicts, the size of the awards, the jury climate, and the risk of punitive damages. Having strong anti-harassment, anti-discrimination, and accommodation policies and procedures, an established complaint and investigative procedure, and an employee handbook describing the at-will employment relationship, are essential steps prior to considering or obtaining an EPLI policy. Employment claims may be dramatically decreased or significantly controlled through careful policy development and decision-making, thereby reducing or eliminating the need for EPLI.

Consideration 2: Policy Coverage

EPLI policies differ significantly with respect to policy definitions, exclusions, conditions, and limitations on coverage. Employers must understand what the policy covers, including the insureds, claims covered, and policy exclusions. For example, many policies will not pay for punitive damages, severance, or claims arising from a violation of the Fair Labor Standards Act (“FLSA”), the National Labor Relations Act (“NLRA”), the Occupational Safety and Health Act (“OSHA”), the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the Employee Retirement Income Security Act (“ERISA”), the Worker Adjustment and Retraining Notification Act (WARN”), state wage payment statutes, and class actions. Likewise, some policies do not cover front pay, liquidated damages, or retaliation claims. Nor does EPLI typically cover legal advice related to the activities that ultimately may lead to the litigation. Unfortunately, many employers do not scrutinize these coverage issues until after a claim is presented and are surprised to learn they do not have the coverage they thought they purchased.

Consideration 3: Case Control and Selection of Counsel

EPLI policies vary greatly with regard to who has the right to select legal counsel and the duty to defend. When EPLI is involved, an employer’s management may no longer have the final determination about how a claim will be handled; the insurance company often retains the right to select defense counsel and make defense decisions. The legal counsel selected by the insurance company may or may not have experience litigating employment cases. The policy may preclude the employer from using a law firm or attorney of the employer’s choice. As most employers know, retaining the right to have experienced employment attorneys who are familiar with the employer is crucial in potential or realized litigation. Prior to entering into a specific policy, therefore, an employer should negotiate for its right to choose counsel and then ensure that such counsel is approved to defend claims under the policy for the duration of the policy. The ability to negotiate choice of counsel after a policy is in place is almost non-existent.

In some cases, the insurance company may retain the right to determine whether a settlement is appropriate. An employer can negotiate as part of its EPLI policy that the insurer will not settle without the consent of the insured. However, many policies include a “hammer clause,” which caps the insurer’s coverage when the insured refuses to consent to settlement.

Another concern with an insurer having significant control over settlement is when a terminated employee agrees to accept less in terms of a monetary settlement in exchange for being reinstated. Understandably, insurance companies prefer to settle cases for as little as possible (although some understand that reinstating a terminated employee may lead to additional claims at a later date). Therefore, an employer considering EPLI should be certain to retain control over the reinstatement decision.

An additional consideration arises when there is a high deductible. The insurer may push for a quick resolution, thereby decreasing its coverage responsibility even though the employer may prefer to proceed with litigation. Similarly, while high deductibles ensure coverage of substantial losses, they leave an employer practically uncovered against smaller claims.

Consideration 4: Protection

The major advantage of EPLI is the protection it affords (assuming the policy limits are sufficiently high) against what could otherwise be a catastrophic claim that results in an employer’s bankruptcy. Fortunately for all involved, those claims are far more rare than the media suggests. The level of exposure varies from state to state. Organizations with employees in California, New York, Texas, Illinois, or other highly-populated states, or in highly-litigious states, may face increased odds of suffering a catastrophic claim. However, the converse is also true in less populous or less litigious states where an employer may be better served focusing its resources on improving its ability to prevent claims.

Ultimately, companies exploring EPLI should conduct a thorough cost-benefit analysis based on all of the factors outlined herein. Employers should also carefully assess: 1) the deductible level and whether the deductible is per claim or per policy period; 2) the limits of liability that the insurance company is obligated to pay during a given period for any claim or suit; 3) whether there is an aggregated limit over a given time period; 4) whether the EPLI policy provides reimbursement of defense costs only at the end of litigation, leaving the employer with a considerable cash flow obligation throughout the case; and 5) whether the policy is a self-liquidating or “burning limits” policy (i.e., every dollar spent on defense reduces the amount available to settle or otherwise resolve the claim by one dollar).

https://www.bairdholm.com/blog/employment-practices-liability-insurance-considerations/

[i] https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatisemploymentpracticesliabilityinsurance.aspx

[ii] https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatisemploymentpracticesliabilityinsurance.aspx