As a business owner, you already know that you need certain basic types of insurance, but you may not have even heard of employment practices liability insurance (or EPLI). This liability insurance covers employee, former employee and potential employee claims against you, including charges of wrongful termination and sexual harassment. Unfortunately, in the late '90s, over 24,000 lawsuits were filed against private employers claiming discrimination. This trend is currently on the rise.

As you look at employment practice liability insurance information, be aware that while policies of course vary from provider to provider, most employment practices liability insurance coverage has a "duty to defend" clause, which says the insurance company must defend the case whether or not the employer's deductible has been met. Also look for a "hammer" clause, which gives the insurance company the right to recommend a settlement; if the employer doesn't agree with this recommendation, the carrier will still only pay the recommended amount. In addition, watch for these features in employment practice liability insurance:

1. Employment practices liability insurance coverage should include all employees, even part-time workers or potential employees.

2. Employment liability insurance should at least cover civil judicial proceedings and arbitration.

3. Some employment practice liability insurance policies go beyond the obvious and cover employment torts like invasion of privacy and intentional infliction of emotional distress.

Action Steps
The best contacts and resources to help you get it done

Find employment practices liability insurance coverage for small businesses

Even if your business is small, there are employment practices liability insurance companies who will provide full coverage insurance. Although most of the 'giant' companies cover only medium or large businesses, there are a number of well-established insurance firms covering smaller businesses.

I recommend: State Farm Insurance provides employment practices insurance to small businesses. INSPRO Insurance also offers EPLI for small to medium-sized businesses.

Choose employment liability insurance for medium-sized businesses

A variety of well-known employment practices liability insurance providers offer EPLI to medium-sized businesses. Look for a strong plan that covers at least the basics--but also consider more unusual clauses that may be particularly suited to your specific business.

I recommend: Zurich offers employment practices liability insurance to companies with fewer than 300 employees (and separate policies for those with more). American International Group (AIG) offers comprehensive EPLI for everything from harassment, discrimination, termination, retaliation, wrongful failure to employ and failure to grant tenure.

Seek employment practice insurance for large businesses

Large businesses and corporations have the easiest time finding comprehensive commercial employment practices liability coverage. Although all businesses should thoroughly analyse their EPLI needs, it is especially important for large business. Get the advice of your employment practices liability insurance agents, certainly, but don't expect them to have the intimate knowledge of your business that you do.

I recommend: The Chubb Corporation offers EPLI for large businesses and corporations. Gulf Insurance provides commercial employment practice liability insurance for large and medium-sized businesses.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Look for employment liability insurance companies that allow you to choose your own attorney. Some policies give the carrier this power and don't always hire lawyers experienced with employment law.