Third-Party Employment Practices Liability Insurance Basics

Here’s something else to keep small business owners awake at night: somebody you never met could sue you for discrimination. Your general liability insurance for small business probably won’t provide coverage, but third-party employment practices liability insurance (aka third-party EPLI) will.

Why You Need Third Party EPLI?

For starters, wrap your mind around the fact that we’ve become an increasingly litigious society looking for the next person to sue, preferably someone with money or assets. And wherever there’s an aggrieved party, there’s a lawyer ready to file a suit on his or her behalf. You’ll sleep a lot better knowing you have the broadest liability insurance coverage possible, including third-party EPLI.

Two Types of Third Party EPLI

There are two basic types of third-party claims that can be brought against you:

The first is when your employee claims to have been harassed by a third party. It could be a receptionist who repeatedly complained to you that the package delivery guy makes suggestive remarks every time he drops something off. You don’t do anything about it and she sues you for tolerating a hostile work environment. Your failure to act on her complaint makes you liable. If she has a smart attorney, she’ll also sue the delivery guy’s company. If you have third-party employment practices liability insurance, you’re covered.

The other type of third-party claim is when someone in your employ (full-time, part-time, temporary, seasonal, contracted – doesn’t matter) harasses or discriminates against someone while on the clock (whether it’s at your place of business or not doesn’t matter.) For example, the attendant at a skate park you own tells a Hispanic patron she can’t come in because the park is full, then turns around and lets in three Caucasian kids. Or one of your real estate agents refuses to show a house to a person in a wheelchair because she doesn’t want tire tracks on the carpets. You’re on the hook if they decide to sue. If there’s a pattern of this type of behavior you could even be the subject of a class action suit…just because you hired insensitive employees. A third-party EPLI policy will pay your court costs and any awards to the plaintiff (depending, of course, on how your policy is written).

What You Should Do To Avoid Claims?

But don’t rely solely on your employment practices liability insurance. As a business owner, you have to shoulder some responsibility. Doing your due diligence, like conducting orientation and periodic training for employees about harassment and discrimination, and having written policies in place are a necessary practice. In addition, they may even result in a lower third-party employment practices liability insurance quote.