What happens when employees become liabilities instead of assets?
Employment practices liability insurance (EPLI) helps protect your business against employment-related claims.
As a law firm, you’re familiar with the threat that lawsuits pose to a business—from slip and fall accidents to claims of negligence and legal malpractice. But have you thought about the risks to your own law firm?
Just like the clients you represent, your firm is vulnerable to legal challenges, particularly from within your own ranks. Employment Practices Liability Insurance (EPLI) is a critical tool that can protect your firm from costly claims related to employment practices, such as wrongful termination, discrimination, and harassment.
Read on for more information about EPLI and how you can implement strategies to lower your risk for a claim.
What Is Employment Practices Liability Insurance (EPLI)?
Employment Practices Liability Insurance (EPLI) provides coverage for claims made by employees, former employees, or potential employees alleging wrongful acts in the employment process.
These wrongful acts can include a variety of employment-related issues, such as:
- Discrimination: Claims of unfair treatment based on race, gender, age, religion, disability, or other protected characteristics.
- Harassment: Allegations of workplace harassment, including sexual harassment and hostile work environment claims.
- Wrongful Termination: Claims that an employee was terminated for unlawful reasons, such as retaliation or discrimination.
- Retaliation: Allegations that an employer took adverse action against an employee for engaging in legally protected activity, such as filing a complaint or participating in an investigation.
- Employment Contract Breaches: Claims related to breaches of employment contracts, including failure to honor terms and conditions.
Why EPLI is Crucial for Law Firms
Like any other business, law firms face significant risks related to employment practices claims. The legal industry’s complex work environment and high standards of conduct make EPLI particularly important. Here’s why:
1. High-Risk Work Environment
Law firms operate in a high-pressure environment where long hours and demanding clients are common. This can sometimes lead to misunderstandings and conflicts, increasing the risk of employment-related claims.
2. Legal and Regulatory Compliance
Employment laws and regulations are constantly evolving. Staying compliant with federal, state, and local employment laws can be challenging, and unintentional violations can lead to costly lawsuits.
3. Protecting Financial Assets
Employment-related claims can result in significant financial losses, including legal defense costs, settlements, and judgments. EPLI helps mitigate these financial risks, protecting your firm’s assets.
4. Preserving Reputation
Allegations of wrongful employment practices can damage your firm’s reputation, affecting client trust and employee morale. EPLI provides the support needed to manage and resolve claims effectively, preserving your firm’s reputation.
What Does EPLI Cover?
Employment practices liability coverage is one of the most overlooked policies, yet it’s the one that law firms need the most.
In case you’re faced with an employment lawsuit, EPLI will help cover legal defense costs as well as settlements and judgments against a variety of claims.
Examples of EPLI Claims
The Equal Employment Opportunity Commission prohibits discrimination and harassment in the workplace; any violation (or perceived violation) of this law has the potential to result in a lawsuit.
It’s very easy to look at your law firm and assume that you are immune to employment related lawsuits because you have an air-tight employee handbook, but employment claims can strike at any time.
For example, even with clear policies against harassment, a staff member might feel that their complaints were not taken seriously or that the resolution was inadequate, leading them to file a lawsuit. Additionally, misunderstandings during the hiring or promotion process can lead to allegations of discrimination, even if your firm follows rigorous non-discriminatory practices. Disputes over wage and hour laws, wrongful termination, or perceived favoritism can also open the door to legal challenges.
No matter how well-prepared your firm is, the complex and often subjective nature of employment law means that claims can arise from a wide range of situations. This unpredictability makes EPLI just as important as a general liability policy (if not more so).
What Factors Affect EPLI Cost for Law Firms?
The cost of Employment Practices Liability Insurance varies widely and depends on several factors that will end up being unique to your law firm. Here are some key factors:
Key cost factors include:
- Firm Size: The number of employees at your firm directly impacts your premium. More employees often mean higher risk — and higher costs.
- Practice Areas: High-risk practice areas or high-profile cases may increase your exposure to employment-related claims.
- Claims History: A history of prior employment claims or lawsuits can raise your premiums. Firms with clean records typically pay less.
- Coverage Limits and Deductibles: Higher coverage limits offer more protection but come with higher premiums. Choosing a deductible that fits your risk tolerance also affects cost.
- Employment Practices and Policies: Firms with clear employee handbooks, regular training, and documented procedures may receive better rates from insurers.
Working with a provider experienced in the legal industry ensures your EPLI policy reflects the unique risks your firm faces — without overpaying for unnecessary coverage.
How to Choose the Right EPLI Policy
Choosing the right EPLI policy for your law firm involves several key considerations:
1. Assess Your Firm’s Risks
Evaluate your firm’s specific risks and exposures related to employment practices. Consider factors such as the size of your firm, the nature of your work, and your firm’s employment history.
2. Understand Policy Coverage and Exclusions
Carefully review the coverage provided by the EPLI policy, including any exclusions or limitations. Ensure the policy covers the types of claims your firm is most likely to face.
3. Consider Policy Limits and Deductibles
Choose a policy with appropriate limits and deductibles that align with your firm’s risk tolerance and financial capacity. Higher limits provide more extensive coverage but may come with higher premiums.
4. Work with an Experienced Insurance Provider
Partner with an experienced insurance provider, like Kouwenhoven & Associates Inc., who understands the unique needs of law firms and can tailor an EPLI policy to fit your specific requirements.
How to Reduce Your EPLI Risk
While EPLI is specifically for protecting your law firm, it’s always best to avoid situations by being proactive. Strong internal policies and workplace practices reduce issues and lower your insurance costs:
Risk reduction tips for law firms:
- Maintain a Clear, Updated Employee Handbook: Outline policies on discrimination, harassment, workplace behavior, and grievance procedures.
- Train Management and Staff: Regularly train everyone — especially managers — on employment laws, compliance, and respectful workplace practices.
- Document Employment Decisions: Keep records of performance reviews, promotions, terminations, and any complaints or investigations.
- Review Policies Regularly: Employment laws change frequently. Conduct regular policy reviews to stay compliant with federal, state, and local regulations.
- Foster a Positive Workplace Culture: Encourage open communication and create an environment where employees feel comfortable raising concerns.
These practices not only help protect your firm but also demonstrate a commitment to fairness — which can be valuable if a claim ever arises.
The Kouwenhoven Advantage
Employment-related lawsuits are a reality for businesses of all kinds, including law firms. Despite your best efforts to create a fair and compliant workplace, the risk of facing an employment claim is always present.
By investing in EPL insurance, your firm can focus on serving your clients without the looming worry of potential internal legal disputes. At Kouwenhoven & Associates Inc., we specialize in providing liability insurance tailored to the unique needs of law firms.
For more than 30 years, we’ve provided law firms throughout Florida with expert guidance, comprehensive support, and—most importantly—customized solutions to meet your firm’s exact needs.
Is your firm protected against employment-related claims? Contact Kouwenhoven & Associates today to learn more about our EPLI solutions and how we can help safeguard your practice against these risks.
