Employment Practices Liability Insurance (EPLI) protects your company from the costs of employee-related lawsuits. Whether it’s a claim of discrimination, harassment, retaliation, or wrongful termination, EPLI can help cover the financial and reputational fallout that follows.

Here’s what it includes, and what it doesn’t.

What Employment Practices Liability Insurance Covers

EPLI provides coverage for a range of claims that stem from how you hire, manage, and let go of employees. Even with good HR policies in place, misunderstandings and allegations can happen. EPLI ensures your business has financial protection if they do.

EPLI covers the cost of defending your company against allegations of employment-related wrongdoing, whether or not the claims have merit. This includes legal fees, settlements, and court judgments resulting from covered events.

Typical scenarios covered by EPLI include:

Wrongful termination

Covers claims that an employee was fired without just cause, in violation of company policy, or for an unlawful reason such as discrimination or retaliation. Even when a termination is well-documented, defending against allegations of wrongful dismissal can be expensive and time-consuming.

Discrimination

Protects your business from lawsuits alleging unfair treatment based on protected characteristics such as race, color, gender, age, national origin, disability, sexual orientation, religion, or pregnancy. Claims can arise at any stage of employment—from recruitment to promotion to termination.

Sexual harassment

Applies to allegations of inappropriate behavior, unwanted advances, or comments that create a hostile work environment. Coverage can extend to both supervisor and peer misconduct, as well as to claims that leadership failed to act after being informed of a problem.

Retaliation

Covers situations where an employee claims they were disciplined, demoted, or terminated for reporting discrimination, harassment, or other unlawful activity. This is one of the most common employment-related claims, and EPLI can help pay for the legal costs of defending your company’s actions.

Failure to hire or promote

Addresses claims that a qualified applicant or employee was unfairly passed over due to bias or discriminatory criteria. These claims can involve subjective hiring decisions, interview practices, or informal advancement processes.

Breach of employment contract 

Provides coverage for disputes over the terms of an employment agreement, offer letter, or non-compete clause. For example, a terminated employee might allege the company failed to uphold a promised bonus, commission, or notice period.

Defamation or emotional distress

Covers claims tied to the way an employee was treated or spoken about in the workplace, such as damaging statements made during a performance review, disciplinary action, or termination. These claims often include accusations of reputational harm or intentional infliction of emotional distress.

What Employment Practices Liability Insurance May Pay For

When a claim arises, EPLI can cover several categories of expenses, including:

• Defense costs: Attorney fees, court costs, and expert witness fees.
• Settlements and judgments: Payments made to resolve a claim or satisfy a court ruling.
• Administrative proceedings: Costs related to Equal Employment Opportunity Commission (EEOC) or state agency investigations.
• Third-party claims: Some policies extend coverage for discrimination or harassment claims made by customers, vendors, or clients.

What Employment Practices Liability Insurance Doesn’t Cover

While EPLI is broad, it doesn’t apply to every kind of workplace issue. Some risks are covered under different policies or excluded altogether.

Common exclusions include:

• Wage and hour claims: Such as unpaid overtime or misclassification. These require separate coverage.
• Workers’ compensation claims: Injuries or illnesses sustained on the job are covered under Workers’ Compensation insurance.
• Employee benefits administration errors: Covered under Employee Benefits Liability or Fiduciary Liability.
• Criminal or intentional acts: Fraud, assault, or deliberate policy violations aren’t covered.
• Bodily injury or property damage: Handled under General Liability coverage.

These exclusions help clarify where EPLI fits within a broader risk management plan. Most companies pair EPLI with General Liability, Cyber, and Directors & Officers (D&O) coverage to create complete protection across management and operational risks.

Learn more about other types of business insurance.

EPLI is most effective when supported by strong HR practices. Keeping policies current, training managers on workplace laws, and documenting employment decisions all help reduce risk. A proactive approach not only prevents disputes but can also lower premiums by showing insurers your company manages employment issues responsibly.

Frequently Asked Questions

Does EPLI cover employees and independent contractors?

Some policies include contractors under “employees,” but others exclude them. Check your policy definitions carefully.

Are defense costs included in the limit?

Usually yes. Most EPLI policies include defense costs within the overall policy limit, which means legal fees reduce the total available for settlements.

Can EPLI cover claims from clients or customers?

Some policies include third-party coverage for harassment or discrimination claims brought by non-employees.

Is EPLI required by law?

No, but it’s strongly recommended for any business with employees. Many investors and clients expect it as a standard part of risk management.

What’s the difference between EPLI and Employee Benefits Liability?

EPLI covers employment-related misconduct, while Employee Benefits Liability covers administrative errors in managing benefits plans.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.