If you are a business owner, Employee Practices Liability Insurance may be something you want to consider. Unfortunately, many people overlook this type of insurance because they already have Workers’ Comp. Confusing the two different types of insurance can be a big mistake and can end up costing you money. But what exactly is Employee Practices Liability Insurance and what is the difference between it and Workers’ Comp? Let’s take a look.
This type of insurance coverage helps to cover the costs of any legal fees if you should ever be sued by an employee or contractor. It can help to protect your business against things like sexual harassment suits, discrimination claims, retaliation claims, wrongful termination cases, or deprivation of career opportunity charges.
Many people often skip this type of insurance because “it would never happen to me”. But remember, you can face an accusation whether or not you are guilty. All it takes is a disgruntled employee to throw an accusation your way for you to face years of legal fees and investigation costs.
Employee Practices Liability Insurance usually covers claims made against any of your management personnel. In some cases, it may also protect other employees. Employee Practices Liability Insurance protects against claims made by employees and former employees, job candidates, temporary staff, and independent contractors. It also protects against claims made by customers and vendors.
An employment suit can be filed against you at any time; however, they are commonly reported following major steps in employment—such as the recruitment and interview process, during training and orientation, after performance reviews, and following employee termination.
The confusion between these two forms of insurance stems from people thinking that Workers’ Comp covers everything regarding situations with employees. It doesn’t. There are two parts of Workers’ Comp. First, it pays for your employees’ medical bills and lost wages if they face a work-related illness or injury. Second, it pays for legal expenses if an employee is ever injured at work because of employer negligence and sues for damages. And this second part is where people often confuse Workers’ Comp with Employee Practices Liability Insurance. Where Workers’ Comp covers legal expenses against injury and negligence, Employee Practices Liability Insurance covers legal expenses against allegations of employer discrimination or other wrongdoing not related to injuries sustained through negligent or poor safety practices.
If you are a business owner, small or large, you need Employee Practices Liability Insurance. Allegation claims can be made regardless of whether you (or a member of your management team) are guilty or not. So being a good person and following all the rules doesn’t necessarily mean you are safe against claims. In addition, you can’t predict the behavior of your management team, no matter how well you vetted them for the position.
As mentioned previously, all it takes is one upset employee to cost you thousands in legal fees—guilty or not. So, when it comes to protecting yourself and your business, it’s always better to be safe than sorry.