What Does EPLI Actually Cover?

/in

A Straightforward Guide for Business Owners

Employment-related lawsuits are on the rise. Whether you have two employees or two hundred, your business is exposed to risk every time you hire, fire, promote, or discipline someone. That’s where Employment Practices Liability Insurance (EPLI) comes in.

EPLI helps cover the legal costs when an employee claims you did something wrong. And in today’s environment, it’s not a matter of if — it’s when.

Let’s walk through exactly what EPLI covers, what it doesn’t, and why every business should be paying attention.

What Is EPLI?

Employment Practices Liability Insurance is a type of commercial insurance policy that protects businesses from claims related to how employees are treated.

This coverage is designed to fill the gap that general liability insurance does not. It addresses the very real (and very expensive) legal exposure that comes from internal HR-related disputes.

What Does EPLI Cover?

EPLI coverage typically includes the following categories of claims. If any of these happen at your company, you’re likely on the hook for defense costs, settlements, or both — unless you have the right coverage in place.

Wrongful Termination

If an employee claims they were fired unfairly, without cause, or in violation of company policy or the law, EPLI can cover legal fees, settlements, and damages. This is one of the most common types of EPLI claims.

Discrimination

Claims related to discrimination based on race, color, religion, gender, age, national origin, disability, pregnancy status, sexual orientation, or other protected classes are covered under EPLI. Even perceived discrimination can lead to a lawsuit.

Harassment

Sexual harassment, verbal abuse, hostile work environments, and other forms of workplace harassment are all covered. Importantly, EPLI does not just protect you from direct actions by leadership — it also covers claims arising from coworkers or third parties if your company is accused of not handling the situation properly.

Retaliation

Employees who report misconduct, file workers’ compensation claims, or participate in investigations are protected under various whistleblower laws. If they believe you retaliated against them, EPLI provides coverage for the resulting claim.

Failure to Hire, Promote, or Provide Equal Opportunity

EPLI covers claims that you failed to promote, hire, train, or provide career development opportunities based on unlawful factors. This is especially relevant for companies without standardized processes for hiring or advancement.

Mismanagement of Employee Evaluations or Disciplinary Actions

Subjective or inconsistent evaluations and discipline can create grounds for an EPLI claim. EPLI steps in when your leadership decisions are challenged in court.

Defamation, Invasion of Privacy, and Emotional Distress

Some policies extend to claims involving emotional distress, libel, slander, or breach of confidentiality. This can include comments made during a performance review, reference check, or termination meeting.

What EPLI Does Not Cover

Like any insurance policy, EPLI has limits. Knowing what is not included is just as important.

Not covered under EPLI:

  • Workers’ compensation claims (these require separate workers’ comp insurance)
  • Workplace safety violations (typically handled by OSHA-related coverages)
  • Wage and hour disputes, including unpaid overtime or misclassification (unless specifically endorsed)
  • Criminal acts or intentional misconduct by the employer
  • Breach of contract or issues covered by other liability policies

Wage and hour disputes in particular are a major blind spot for many businesses. Some EPLI policies allow you to add limited coverage through an endorsement, but most exclude them by default.

Who Needs EPLI Coverage?

Any business with employees is exposed to EPLI risk. That includes:

  • Small businesses with limited or no HR support
  • Companies experiencing fast growth and frequent hiring
  • Businesses with high employee turnover
  • Organizations operating in heavily regulated industries
  • Companies with multiple locations or remote teams

Don’t assume a tight-knit team or good company culture is enough to protect you. Even businesses that “feel like family” have been sued by former employees.

It only takes one disgruntled team member, one sloppy termination, or one misunderstanding to turn into a five- or six-figure legal issue.

What Does a Lawsuit Actually Cost?

An EPLI policy is not just about worst-case scenarios. It’s about real numbers.

The average cost to defend an employment practices claim is between $50,000 and $100,000. If the case goes to trial, the median judgment against employers is over $200,000. Settlements are common, but even those can cost tens of thousands — not including legal fees.

With EPLI, your insurer typically covers:

  • Legal defense costs, even if the claim is groundless
  • Court fees and expert witness expenses
  • Settlements and judgments (up to your policy limits)

Without EPLI, you’re paying all of that out of pocket. And no, your general liability policy won’t cover it.

Do You Already Have EPLI?

Not all businesses know whether they have this coverage. EPLI can be included in:

  • A standalone EPLI policy
  • An endorsement added to your Business Owners Policy (BOP)
  • A package policy with other lines of coverage

But not all policies are created equal. Limits, exclusions, and claims-made vs. occurrence-based coverage terms matter.

If you haven’t reviewed your EPLI policy in the past 12 months, or if you’re not sure it’s even included, it’s time to get a second opinion.

Bottom Line

If you have employees, you have risk. EPLI helps protect your business from the very real costs of employment-related claims. It doesn’t replace good HR practices or legal compliance — but it does give you a financial safety net when things go wrong.

Most businesses don’t realize how exposed they are until it’s too late. Don’t be one of them.

Not Sure Where You Stand?

Apex Risk & Insurance Services helps businesses identify and close coverage gaps — including employment practices liability. If you’re not sure whether your EPLI policy is enough, we’ll give you a straight answer.

Let’s talk EPLI.