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Going Beyond a BOP: Educate Your Clients on EPL Insurance

Coalition blog: Business Owner’s Policy (BOP)vs Employment Practices Liability (EPL) insurance

Small business owners have more than enough on their collective plates. As a broker, you’ve likely guided your SMB clients to get started with a standard Business Owner’s Policy (BOP). As a core offering, BOP insurance protects businesses from certain types of risk—property, liability, and business interruption, and is a great first step. 

But what companies may not realize is that a BOP typically does not cover employment-related lawsuits. This can leave them vulnerable to accusations of wrongful termination, discrimination, harassment, and more—in addition to facing hefty attorney fees and court costs.

And presenting cause for concern, a survey from ADP found that 54% of small business owners handle HR and employment matters themselves. Even more concerning: 70% of SMB survey respondents said HR responsibilities are handled by people who have many other responsibilities within the company – and little to no experience in managing these sensitive workforce issues.

This is where Employment Practices Liability (EPL) insurance can truly make a difference for SMBs with little or no dedicated HR expertise. EPL coverage helps businesses minimize potential losses when there are incidents of:

  • Wrongful termination

  • Discrimination

  • Harassment

  • Retaliation

  • Compensation disputes

EPL lawsuits within the last two decades have increased by 400%. And 41% of EPL claims involve businesses with fewer than 100 employees, so it’s a wise decision for companies of all sizes to protect themselves against employment practices claims with EPL insurance.

As if that wasn’t enough to convince your clients they need additional insurance coverage, here are additional considerations for why standalone Employment Practices Liability coverage delivers more value than adding an EPL endorsement to the BOP. 

1. A BOP endorsement has lower policy limits

Policy limits cap out at a lower amount than a standalone EPL policy, often around $500,000 or lower, but policyholders are still subject to similar retentions. Some policies also have a provision that includes defense within the policy limits, meaning your limits could be eroded fairly quickly, and you could be stuck paying the remaining costs of the lawsuit out-of-pocket. 

2. A BOP endorsement has more restrictions and exclusions

EPL endorsements on a BOP are more restrictive in terms of the types of claims covered. 

Wage and hour lawsuits have become a "sweet spot for plaintiffs" as these types of claims remain a huge driver of legal risk and lawsuit activity. Unfortunately, wage and hour claims aren’t always covered by the endorsement on a BOP.

And, while retaliation is consistently the top claim type filed with the EEOC every year, the EPL endorsement available on a BOP may not cover these types of claims. This shows how critical it is to have standalone coverage and protect your clients from this broad exposure.

Additionally, a BOP endorsement typically does not provide coverage for prior acts, while a standalone EPL policy offered by Coalition covers claims made during the policy term – not just claims that occur during the policy term.  

3. A BOP endorsement has a more narrow definition of "employee" 

EPL endorsements on a BOP are usually more limited when defining who the business is protected from. This means your client won’t be protected if a claim arises from former, prospective, temporary, and seasonal employees, or from volunteers, interns, and independent contractors. Current, full-time employees represent only a fraction of the different types of workers that have interacted with a business, leaving them vulnerable to potential lawsuits.

4. A BOP endorsement lacks coverage for third-parties 

Another consideration is the coverage for third-party liability. Standalone EPL usually covers claims brought by outside parties such as customers and vendors against the employees of the business. This type of third-party coverage isn’t usually available with a BOP.

5. A claim against the endorsement can even cause non-renewal of the BOP

Filing an EPL claim on a BOP can reduce the available general liability limit, so if any other incidents were to occur, such as property destruction from a natural disaster or customer injuries incurred on-site, your clients could be stuck in a risky financial position. Some insurance providers may also refuse to renew the policy if an EPL claim is filed, causing your clients added stress in the search for a new provider. 

Extend your clients' coverage with EPL

Standalone EPL offered by Coalition is the smart choice for growing businesses that want to protect what matters. With Coalition, your clients can fill the gaps in their current coverage and minimize their risk in a cost-effective way. 

  • Coverage up to $10M - Coalition covers up to $10M for businesses with up to 250 employees, with most customers opting for limits between $500,000 and $2M. And standalone EPL coverage from Coalition gives your clients more value for the premium than what they’d pay for an EPL endorsement on a BOP.

  • Defense outside policy limits - We pay up to $1M for defense costs—separate from policy limits—so your clients can reserve more of the policy limits for judgments and settlements.

  • Higher sublimits - Coalition provides higher sublimits than what’s available with an EPL endorsement. Your clients can get covered for:

    • Up to $250,000 for wage and hour claims, such as overtime pay violations or failure to provide breaks

    • Up to $100,000 in defense costs for immigration-related claims, such as violations of the Immigration Reform Control Act of 1986

    • Up to $250,000 for expenses to respond to a workplace violence event, such as security guard services, public relations consulting services, or counseling sessions.

  • Coverage in a broader range of scenarios - with Coalition’s broader definition of "employee," we protect your clients in a wide range of scenarios, such as claims made by past, prospective, temporary, and seasonal employees, as well as volunteers, interns, and independent contractors. We even cover you in cases involving vendors and customers.

  • Generous retention waiver - Coalition typically offers a 10% retention reduction for the first settlement opportunity.

Coalition also gives your clients access to a robust suite of risk management resources, including a pre-claims hotline, employee training, templates, best practices, and more to help them learn how to proactively protect themselves against these types of claims

To learn more about how to advise your clients on their employment practices and a myriad of other management liability risks, check out our new guide Unlocking Growth with Executive Risks.

Coalition Insurance Solutions Inc. is a licensed insurance producer (Cal. license #0L76155) offering A+ rated employment practices liability coverage in the U.S. on behalf of Zurich American Insurance Company, located at 1299 Zurich Way, Schaumburg, IL 60196 (NAIC # 16535). See licenses.