Employment practices liability claims and circumstances are the most frequent legal claims against law firms today. The insurance policy for these claims, called Employment Practices Liability Insurance, is cheap and with the right law firm industry customization (details below) can protect these headline grabbing cases from turning into your worst nightmare.
What is it? Employment practices liability insurance policies (EPLI) provides defense coverage (legal fees) and settlement / judgment reimbursement for employment related claims such as allegations of harassment, discrimination, wrongful termination, wrongful discipline, etc. The policy is relatively inexpensive – around $200 per employee covered. While often these claims do not have any merit, there is still the expense of defending your firm and its reputation.
Every law firm EPLI policy should include:
- Third party coverage. This provides coverage for discrimination and harassment claims from people other than your employees (i.e. vendors, court reporters, clients). Watch out for policies that include Third party coverage but exclude claims made by clients.
- Coverage for failure to make partner/ promote should be provided. Some policies that are not specific to law firms may not include this coverage.
- Prior Acts Coverage. As a new policy, it is far more valuable with this clause.
- Wage and hour law defense sub-limit – most policies exclude wage and hour law claims for law firms. Some policies will give you a sub-limit to defend these types of claims. If available, it’s usually a very minimum or no cost to have it added to your policy. Ask about it.
The most common excuses why law firm don’t buy the coverage:
“But we would just defend ourselves anyway”
Reality check: Think about how much time that takes away from other (billable) work you could be doing.
“But we have great long term employees and partners that wouldn’t do anything wrong and all get along well together”
Reality check: Even disgruntled prospective employee who feels they were wrongly denied an opportunity to work at your firm can cost you money without the coverage.
“We don’t have an employee handbook? The application is asking about our handbook – now what?”
Reality check: Don’t worry. Some insurance companies will allow you to purchase the policy and give you a certain time period to get an employee handbook in place. Some insurance companies even have online programs with sample handbooks, policies and procedures to help you create a handbook.
Employment Practices Liability Insurance is one area of insurance firms often dismiss until AFTER they have a claim. Speak to your broker today – don’t let that happen to your firm.
