Employment practices liability insurance carries a reputation problem long before it ever gets discussed on its merits. Many employers picture it as coverage built for a narrow slice of the business world – large, publicly traded, US-headquartered companies – and assume it has little to do with them. That assumption is incorrect, and it's the first thing Samantha Rodrigues (pictured), AVP of executive risk at HUB International, has to provide education on in most conversations about the coverage.
"One of the biggest misconceptions is that we see often is that employment practices liability, or EPL, is that it’s for large US public companies," Rodrigues said. "The reality is actually quite the opposite.” Any organization with people in an employment relationship – employees, potentially volunteers, regardless of company size – carries this exposure, whether or not it's structured as a traditional for-profit business.
That assumption, Rodrigues said, tends to travel with a second one: that EPL only matters for a catastrophic, headline-grabbing scandal.
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"It doesn't have to be just a catastrophic or large and severe claim," Rodrigues said. "EPL does respond (and that's where we see it come into play quite a bit) in the lower-severity, higher-frequency loss of employment claims."
Clients may also think this exposure is covered under another liability policy, but it isn’t. Non-profits and private companies can traditionally find EPL coverage under their Directors’ and Officers’ liability policy, while public companies need to purchase standalone EPL.
That lower-severity, higher-frequency pattern, Rodrigues said, comes down to how broadly EPL exposure is defined in the first place.
Nearly any employment decision can become the basis of a claim, Rodrigues said, regardless of whether the claim has merit – an employee who feels wronged can still bring one, and the costs start accumulating from there. She attributed the resulting frequency to how personal HR matters tend to be, in contrast with larger, more impersonal business decisions.
That personal dimension, she said, is part of what separates EPL claims from other commercial exposures employers are more used to budgeting for, and it's part of why the "it won't happen to us" assumption tends to break down once a company actually has staff on payroll.
The size-and-scale misconception shows up even more sharply among nonprofits, Rodrigues said, where organizations often assume their structure puts them outside EPL's reach entirely.
"You can be a private mid-sized company with operations in the US, or you can be a Canadian-only nonprofit or an Ontario-only nonprofit. A lot of them still think they're not going to need it," Rodrigues said.
That assumption is misguided, Rodrigues said. Nonprofits often rely heavily on volunteers and members rather than paid employees, which leads many to conclude they don't have HR exposure at all. In practice, she said, that same volunteer relationship still creates the dynamic that gives rise to EPL risk – meaning the exposure, and the need for coverage, exists regardless.
That exposure isn't limited to paid staff, Rodrigues said, and doesn't necessarily depend on the claimant being compensated at all.
Whether a claim ties back to compensation depends on the specific allegations and scenario, Rodrigues said, but there are cases where it doesn't. She used the example of a volunteer at a nonprofit who reports to a supervisor and is harassed by that supervisor. Even though the person is a volunteer rather than a paid employee – and employment practices liability coverage is nominally built around an employment relationship – that volunteer could still sue the nonprofit for harassment, and the claim would fall under the policy.
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Whether that scenario is actually covered comes down to how a specific policy is worded, Rodrigues said, but insurers have increasingly built volunteer exposure into standard EPL coverage.
"Caveat to that is how the wordings are structured and how your actual policy is structured. But volunteers are quite often covered nowadays. It's a well-known fact that the nonprofits are going to have this exposure," Rodrigues said. "So, without making any sweeping statements, I'd say the likelihood is that a policy will have volunteers covered as well. And if you have that exposure, just check with your broker to make sure."
