Last updateTue, 11 Feb 2020 10pm

EPLI - the insurance you don’t need?

Employment Practices Liability Insurance

corporations get sued for their employment practices.

• Fact: More than 50% of EPL charges are filed against small businesses.

I don’t need it because most claims can be settled out of court.

• Fact: True, most claims never get to trial but the typical claim will cost $65,000 to investigate, defend, and settle; many cost much more.

We treat our employees like gold (or diamonds) and we bend over backwards to always be fair.

• Fact: Claims can come from the least expected; not just employees, but also previous employees, and even potential employees – people who apply and, for whatever reason, don’t get hired.

Don’t the laws only apply to companies that have more than a certain number of employees?

• Fact: There are “size of company” applications to certain federal and state laws (defined by number of employees), but the civil actions have no such restrictions.

EPL claims only happen in cities - like New York, Chicago, and Los Angeles.

Milwaukee: Three female employees of a jewelry store sued the store for permitting a sexually hostile work environment that included inappropriate banter, touching by manager, and retaliation.

Settlement: $155,000

Michigan: A female employee and coworker alleged sexual harassment and abuse while working at a retail store; she was fired by the owner.

Demand: $100,000

Jury award: $347,250

Anchorage: A pregnant employee claimed she was denied a promotion due to her pregnancy.

Settlement: $55,000

Rhode Island: A jewelry manufacturer closed two plants. A particular employee who had received good performance reviews and who had been promoted during her tenure with the company during her employment was dismissed. She did not have seniority. She claimed wrongful termination based on age discrimination.

Demand: $17,500

Jury award: $70,000

Washington: A female store associate of a retail jewelry store claimed that the manager used foul and offensive language about female employees and customers.

Jury award: $138,600

Solano, CA: A woman claimed that she had been laid off from her job with a retail store because she had begun wearing a traditional Muslim headscarf.


Greenbelt, MD: Four employees sued the store for discriminating in hiring, pay, promotions, and conditions of employment against a particular race of employees and applicants.


What are listed above are charges of sexual harassment, sexual discrimination, wrongful discharge, hostile work environment, religious discrimination, and racial discrimination. These are all matters of public record in cities and towns across the United States.

None of the cases listed would be covered under a jeweler’s Business Liability insurance. The language in General Liability that excludes coverage from claims that fall under the broad umbrella of “employment practices” is clear and unequivocal.

And “claims” may be brought against a company by current employees, former employees, leased workers, temporary or seasonal workers, applicants seeking employment, or non-owner officers.

EPL Basics

It is illegal for an employer to discriminate on the basis of age, color, pregnancy, race, religion, sex or gender, national origin, or physical or mental disability. Note also that the term “disability” has been very broadly interpreted in the courts.

In the federal law, Title VII, the ADA (Americans with Disabilities Act), and the ADEA (Age Discrimination in Employment Act, 1967), the following employment activities are monitored and regulated:


  • Hiring and firing;
  • Compensation, assignment, classification of employees;
  • Transfer, promotion, layoff, or recall;
  • Job advertisements, recruiting, or testing;
  • Use of company facilities;
  • Training and apprenticeship programs;
  • Fringe Benefits;
  • Pay, retirement plans, and disability leave.


One problem faced by employers today is that management does not always know about underlying problems. For example a “hostile work environment” may exist in the perception of an employee or employees which management may not deem to be inappropriate – or may not even be aware of.

One important question management must be asking itself today is, are there avenues that are both friendly and unthreatening which permit an employee to confidentially discuss hostile work situations? Another question is, are there procedures and standards in place which can address the issue?

Sexual Harassment

Sexual harassment has been defined as any unwelcome advance or request for sexual favors. It can include quid pro quo, (literally this for that, i.e., “if you will do something for me, I will do something for you”), and may be closely related to or may accompany hostile environment situations.

Sexual harassment is not limited to the work site – it may just as easily occur elsewhere, with or without the employer’s sponsorship of an off site event.

Damages may include civil assault and battery, intentional inflictions of emotional stress, and invasion of privacy.

Are there trends?

From 1994 through the year 2000, employers prevailed in 50% to 69% of cases overall (Jury Verdict Institute) – of cases that actually went to trial. However the majority of cases do not go to trial at all and result in settlement between plaintiff and defendant, at an average cost to defend of $150,000.

And each year sees a higher number of claims filed than the year previous.

Experts predict that the economy may become another factor which increases the number of claims in the future, as employers may be forced to consolidate resources and be forced to release employees; and as replacement jobs become more difficult to find.


As previously stated, this type of exposure is a wide gap in coverage for most jewelry business employers, due to clear exclusions in the general liability policy.

Special coverage is becoming available both through agents’ excess and surplus markets (the “wholesale” part of the jewelry industry) and through some standard carriers.

The type of coverage is “Employment Practices Liability Insurance,” or more simply, “EPLI.”

Unlike standard general liability insurance products, most EPLI is written on a “claims made” basis; whereas general liability is considered “occurrence” based.

Here’s the difference.

In general liability insurance, it is when an insured event occurred that determines coverage; and a policy covers those events which occur while the policy is in force.

For example: a person falls in your store during a time that your coverage is with company A, but suit is not brought until later, when coverage has been replaced by company B. It is company A which must respond to the claim, even though it is no longer your insurer.

In most EPLI, the time that the claim is made is what determines coverage. In the above example, if it were an employment practices situation rather than a slip-and-fall, insurance company B would have to address the claim – even though the insured event (e.g., sexual harassment) occurred before it was your insurer.

Some cautions, as result of this distinction:

1. If buying EPLI to replace a previous carrier’s coverage, be certain that the new insuror is aware of the previous coverage and agrees to accept any claims which might now arise from previous events. This is referred to as going back to the retro date, i.e., the date at which EPLI was originally purchased.

A new carrier should assume coverage for “past sins” reported in the new policy period.

2. If canceling EPLI altogether, it is wise to purchase extended coverage for any unknown claims which may have occurred while coverage was in force, but which may appear after cancellation of coverage. In insurance vernacular, this is sometimes referred to as buying a tail, which may extend for a year or more after cancellation. There is a cost for the extended coverage, but much less than the in-force policy.

Now a history test: When was the Civil Rights Act originally written?


  • 1866
  • 1952
  • 1964
  • 1993


The answer is 1866 – at the conclusion of the Civil War! It prohibited discrimination based on race and national origin.

The Civil Rights Act of 1866 remained unchanged for 98 years, at which time the Civil Rights Act of 1964 was passed, extending protections to sex, religion, and pregnancy.

Following that: the Age Discrimination Act of 1967 (amended in 1978 and 1986) was passed; and then the Family Medical Leave Act of 1993.

The Americans with Disabilities Act is more recent legislation and contains five parts or “titles” - a very important one to the retail industry being Title III which pertains to full and equal enjoyment of goods and services, facilities or privileges of private entities serving the public.

Title III is the reason that entrances, rest rooms, and other facilities sometimes must be redesigned to make them more “user friendly.”

For more information about the Americans with Disabilities Act, contact the U. S. Department of Justice, Civil Rights Division, (800) 514-0301 (voice) or (800) 513-0380 (TTY).

So do you need EPLI?

If you do not have the coverage, now is the time to ask your insurance professional about it. You may be pleasantly surprised at the cost, relative the potential loss. The premium is based on the number of employees that you have (and hence your risk of having a claim).

Remember the cautions about replacing or canceling EPLI coverage.

To assume that you are not at risk and do not need the coverage because you “treat your employees well and they all love you” may be naïve – and not the best strategy. While employers often are vindicated, it is the cost of defense that is the important issue – and EPLI is designed to cover that cost, as well as the damages should you lose.

Bob Carroll of Robert G. Carroll and Associates is a Certified Insurance Counselor, and has been a specialist in insurance for the jewelry industry for over 25 years - an independent agent representing Jewelers Mutual and other quality carriers in Arkansas, Oklahoma, Mississippi, and Tennessee. He may be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..