Employment practices liability insurance (EPLI) covers businesses against claims by employees alleging wrongful termination, discrimination, sexual harassment, retaliation, and other employment-related violations. Essential for any business with employees.
Coverage Summary
EPLI covers employers against claims alleging wrongful employment practices including discrimination (race, sex, age, disability), sexual harassment, wrongful termination, retaliation, and failure to promote. Legal defense costs alone average $75,000–$125,000 per claim before any settlement. EPLI is available as a standalone policy or as part of a management liability package. Premiums range from $1,500–$50,000+ annually depending on employee count, industry, and claims history.
Wrongful Termination — Senior Employee
Industry: Technology
A 58-year-old software engineer was laid off during a company restructuring. The termination was part of a reduction in force affecting 12 employees. The employee sued under the ADEA, alleging age discrimination — pointing out that 10 of the 12 employees terminated were over 50, while the company hired several younger engineers post-layoff.
Claim amount: $340,000
Outcome: EPLI carrier defended the claim. The carrier retained specialized employment counsel. Deposition evidence revealed the reduction-in-force criteria were inadequately documented. Case settled for $235,000 in damages plus $105,000 in plaintiff attorney fees. Defense costs: $95,000. Total EPLI payment: $435,000.
Lesson: Reduction-in-force decisions must be based on documented, objective criteria applied consistently regardless of protected characteristics. An adverse impact analysis before implementing a layoff can identify and address potential disparate impact on protected groups.
Sexual Harassment — Restaurant
Industry: Hospitality / Restaurant
A female server filed an EEOC charge and subsequent lawsuit against a restaurant alleging sexual harassment by the kitchen manager over a 7-month period. She alleged the harassment was reported to the owner but no action was taken. The EEOC issued a right-to-sue letter.
Claim amount: $185,000
Outcome: EPLI carrier defended. The lack of documented investigation by the owner was damaging to the defense. Case settled for $110,000 in compensatory damages plus $75,000 in attorney fees. Defense costs: $65,000. Total EPLI payment: $250,000. The carrier required the restaurant to implement formal anti-harassment training as a policy condition.
Lesson: Prompt documented investigation of all harassment complaints — even informal ones — is the single most important defense against EPLI claims in hospitality. A documented response demonstrating the business took action immediately upon notice dramatically changes claim outcomes.