few years ago, Janet Lightner
realized that her company was
exposed to too much risk,
so she did something about
it. Boundary Bay Brewery in
Bellingham, Wash., was founded
in 1995. By 2014, it had added a
bistro and employed nearly 120
people. That’s when Lightner
bought employment practices
liability insurance (EPLI) to help
protect against allegations of
sexual harassment and other
“There were a lot of considerations that led us to take
EPLI,” says Lightner, the brewery’s general manager.
“Notably, we had grown.” At the same time, employment-related claims were on the rise nationally, and in the brewing
industry in particular. Then came the #Me Too movement
and the headlines alleging sexual harassment and assault by
celebrities and senior executives. “It validates that the decision
we made was a … necessary one,” she says.
While Boundary Bay hasn’t faced any claims under the
policy to date, Lightner is glad to have the peace of mind.
And she’s in good company. Fearing lawsuits alleging wrongful employment practices, a growing number of business
leaders are girding themselves with EPLI. But HR professionals will have to do their homework to determine whether
such coverage is appropriate and whether it will limit potential liability as they hope. After all, a big judgment for
an aggrieved employee, not to mention the cost of litigation,
could be devastating. But the right insurance policy could
soften the blow. It might even save your business.
A CRITICAL HEDGE
Even unfounded allegations can come with a price—which is
why some HR professionals believe EPLI is essential. “A company can do everything right to follow best practices and policies, but that doesn’t stop employees from fling lawsuits. And
the cost of defending against those claims and paying them
can be very expensive,” says Danna Hewick, SHRM-SCP, vice
president of human resources and business development at
USSI, a Bethesda, Md.-based janitorial services frm.
The average cost for defending and settling employment
law cases is $160,000, according to business insurance company Hiscox.
EPLI “is a good way to mitigate risk to a company, and it’s
unfortunate that many small and midsize companies don’t
carry it,” Hewick says. (Some of her past employers purchased
EPLI to limit potential liability, and USSI is considering it.)
For some, it is standard protection. “Most PEOs [pro-fessional employer organizations] ofer EPLI insurance to
their clients and, as a rule, recommend companies procure
this type of coverage,” says Katie Stewart, senior director
of HR client service at Tandem HR, a Chicago-based PEO
that outsources human resources services.
RISE OF A NICHE PRODUCT
The use of EPLI has been growing, according to ISO MarketStance, an insurance data company. Another 49 percent
rise is expected in the coming years, eventually reaching $3.1
billion in 2025.
Overall, though, not many company leaders purchase this
niche product. Only about 4 percent of U. S. frms had it in
2016. Still, that covered 33 percent of all U.S. employees, since
larger employers with more workers are more likely to buy it.
Nearly 56 percent of organizations with 5,000 or more employees carry it, compared with less than 2 percent of businesses with 1 to 4 workers, according to ISO MarketStance.