Why Your Nonprofit Clients Shouldn’t Overlook Employment Practices Liability Insurance
Maureen Dyson, Area Executive Vice President, Charity First
As an insurance professional serving nonprofits, you know that organizations aren’t immune from claims involving illegal discrimination, wrongful termination, sexual harassment, wage and hour violations, and similar issues. In fact, these claims have become so prevalent that in 2023, the Equal Employment Opportunity Commission took steps to proactively address key issues involving Employment Practices Liability Insurance (EPLI)-related claims by creating and enforcing stricter laws to protect employees.
Why EPLI matters
EPLI protects nonprofits from claims when employees allege that the organization is responsible for violating their legal rights. It safeguards nonprofits against legal challenges and ensures their financial stability and reputation.
Unfortunately, many organizations overlook the importance of EPLI coverage. In today’s litigious environment, EPLI shouldn’t be considered optional or extra coverage; instead, it should be a crucial component of a comprehensive risk management strategy for every nonprofit organization to protect it from financial and reputational damage.
Here’s why EPLI matters for nonprofit organizations:
1. Even if an organization is found not to be at fault in an EPLI claim, it can still be held responsible for paying certain legal fees and defense costs. According to the NRMC, more than half (60%) of all EPLI claim expenses are for defense costs, which can exceed tens of thousands of dollars. An EPLI policy will reimburse an organization for the costs of defending a lawsuit in court and for judgments and settlements — regardless of the outcome.
- An organization’s general business insurance policy will not protect against claims involving employer-employee conflicts. In most cases, even a commercial umbrella insurance policy will exclude claims specifically involving employment-related issues.
- Volunteers, although unpaid workers, can also file an EPLI claim against the organization if they feel that they have been discriminated against, sexually harassed or wrongfully terminated. Coverage for these types of claim issues under an EPLI policy will extend to volunteers — just as if they were paid employees.
- Nonprofits with only one paid employee can be at risk for an EPLI claim. The reality is that even a lawsuit involving just one person will require an organization to defend itself in court. So, while smaller nonprofits may argue that they can’t afford an EPL insurance policy, the cost of coverage is nothing compared to the financial impact of the organization having to defend itself in court.
- The most common claims defended by EPLI policies for nonprofits are very similar to those experienced in the for-profit sector and include wrongful termination, age, race, religious and sex discrimination, sexual harassment, wrongful employment decisions that violate the Americans with Disabilities Act, and illegal retaliation.
Conclusion
Given the increase in claims, having EPLI coverage is essential for all nonprofits to protect their financial stability and reputation. When speaking with your clients, it’s important to present EPLI as a vital coverage against potential legal pitfalls by mitigating claims arising from employment-related issues.
About Charity First
Charity First is committed to providing our retail partners nationwide with best-in-class underwriting, consistent and responsive service, and risk management services that include Employment Practices Liability Insurance, Directors and Officers Liability Insurance, and Accident Insurance for volunteers and participants.
To learn more, please contact us at 800-352-2761 or marketing@charityfirst.com.
Looking for nonprofit insurance coverage? Reach out to Maureen Dyson, Area Executive Vice President, at maureendyson@charityfirst.com or connect with her on LinkedIn.