EPLI and Workers’ Compensation: What’s the Difference?
Your company may be tight-knit. Your employees, staff and management may even be so close that it feels more like a family than a group of co-workers.
But even businesses that work hard to achieve a collegial, close-knit workplace culture get hit by employee lawsuits.
In fact, according to the Insurance Journal, studies indicate that American companies face a 12 percent chance of being the recipient of a lawsuit.
You may think that big corporations face the most risk, but small- to mid-sized businesses are at risk, too; statistics show that companies with 10 or more employees have a higher chance of being hit with a lawsuit.
New York business owners can protect themselves and their companies from employee actions through two types of coverage: Workers’ Compensation Insurance and Employment Practices Liability Insurance.
Let’s take a deeper look into the differences between these two types of coverage and how they can protect your New York business.
Workers’ Compensation Insurance in New York
As the owner of a business, you already know that workers’ compensation insurance protects your company — and your employees — in the case of an on-the-job or work-related accident or injury.
In most cases, New York businesses are required by law to carry workers’ compensation coverage.
First, we’ll look at what workers’ comp does cover:
Lost wages and medical costs for employees that are injured, become ill or have an accident while on the job or performing work-related duties
Legal expenses for an employer if they’re sued by an employee over work injuries that are a result of employer negligence or that are not covered under workers’ comp
In most cases, workers’ comp kicks in whether an injury, accident or illness is caused by an employee’s carelessness or is simply the result of an accident.
Workers’ compensation benefits include:
Costs related to medical care, such as surgery, medication or doctor visits
Expenses due to rehabilitation or physical therapy
Replacement income if the employee can’t work as a result of the incident
Costs of vocational training or new job placement if the employee can’t continue in the same position
Compensation to an employee’s family if the employee is killed on the job
If an on-the-job accident, injury or illness is covered by workers’ compensation, the employee typically can’t file charges against you.
However, many New York business owners don’t realize that workers’ compensation coverage doesn’t protect you against all employee-related issues that might arise… and specifically does not protect you from lawsuits related to employment practices.
That’s where employment practices liability insurance comes in.
I should also mention neither workers’ compensation or employment practices provides coverage for action over or Labor Law 240/241 claims. More on that topic here. ***LINK***
Employment Practices Liability Insurance in New York
Also known as EPLI, employment practices liability insurance offers protection for your company and your business assets if you’re sued by an employee.
EPLI is a type of professional liability insurance that covers so-called wrongful acts.
Specifically, EPLI coverage protects you if an employee sues you for alleged wrongdoing such as:
Discrimination based on age, gender, race, orientation or other factors
Violations of the Americans with Disabilities Act
Wrongful termination or demotion
Failure to promote
Invasion of privacy
Deprivation of a career opportunity
Libel, slander or defamation
Breach of contract
Mismanagement of benefits
Violation of the Family Medical Leave Act
Wrongful infliction of mental anguish or emotional distress
If an employee sues you for alleged wrongdoing, EPLI coverage will help pay for legal defense as well as settlement and judgment costs… and such costs can mount quickly.
It’s important to remember that even if a claim is frivolous or ends up being dismissing, you’re still on hook to defend yourself and your company.
Does My New York Business Need Employment Practices Liability Insurance?
In a nutshell, yes!
We live in a litigious society, and every employer is at risk of facing an employee lawsuit.
Keep in mind that, as a rule of thumb, workers’ compensation insurance protects you from claims related to physical injuries and illnesses, and EPLI covers you when an employee claims their rights have been violated in some way.
No matter how hard to work to keep your business’ policies and procedures professional and within applicable regulations, an EPLI lawsuit can spring up at any time during the recruitment, hiring, employment, promotion and termination processes.
Current, past and even prospective employees can bring an EPLI suit against you, so why take a chance?
Along with workers’ compensation insurance, employee practices and liability insurance coverage protects your New York business and your assets.