Choosing Your Limit for Employment Practices Liability Insurance

When we think about safeguarding our businesses, Directors and Officers (D&O) liability insurance is often at the forefront of any agenda, as it’s the go-to for shielding your top brass from legal woes, but Employment Practices Liability Insurance, or EPLI, is equally important. As a business, the limit you set for your EPLI is vital, and will depend on many factors.  

What is Employment Practices Liability Insurance?

Employment Practices Liability Insurance (EPLI) protects businesses against claims from employees alleging wrongful treatment, such as discrimination, harassment, wrongful termination or retaliation. It covers legal costs, settlements and damages, helping companies navigate employment disputes and mitigate financial and reputational risks. The financial and reputational implications of such claims can be severe. Even if a company successfully defends against an EPL claim, the costs of legal fees, court time and potential damage to its reputation can be substantial.  

What is the EPL limit?

The EPL limit refers to the maximum amount an Employment Practices Liability Insurance policy will pay out for claims during the policy period. This includes legal defence costs, settlements and any damages awarded. Policies can be based on:

 

1. ‘Any One Claim’ (AOC) limit, which covers each claim separately up to the full policy limit. Or,
2. ‘Aggregate Limit’ – the total amount the insurer will pay for all claims combined during the policy period (although most policies are now AOC only).

  Choosing the right limit depends on factors like company size, industry risk, past claims history and potential legal costs.  

Choosing the right EPLI limit

As selecting the appropriate coverage isn't a one-size-fits-all scenario, let’s delve further into what your EPLI limit will depend upon:

Past claims

If your company has faced employment-related claims before, especially recurring ones, this needs taking into consideration.

Industry specifics

Some sectors are more susceptible to EPLI claims. Public sector entities, housing associations, education and care sectors often present higher risks, and factors like strong union presence and unique operational challenges also play a big role.​

Company size

Larger workforces naturally increase the probability of claims and, whilst robust HR policies help, they can't eliminate all risks.​

Financial health

Economic downturns or restructuring can lead to layoffs, heightening the chance of claims. Insurers might scrutinise your processes during such times, possibly adjusting coverage terms.​

Mergers and acquisitions

Combining companies often results in role redundancies and, even with regulations like TUPE aiming to protect employees, the transition can be a minefield for EPLI claims.​

Legal landscape

The UK has clear guidelines on employment awards. For instance, in 2021/22, the average unfair dismissal award was £13,541, with the maximum hitting £165,000. Discrimination claims averaged £27,607, peaking at £228,117. These figures can guide your coverage decisions.​ (Source, MPR)

  By understanding your company's unique risks and the broader legal environment, you can select EPLI coverage that truly safeguards your business. Remember, it's not just about compliance; it's about fostering a fair and respectful workplace for all.

Want to know more? The expert team at Ascend Broking Group can answer all your questions on Employment Practices Liability Insurance and beyond. Give us a call today on 01245 449060 or email matthew.collins@ascendbroking.co.uk.