Employment Practices Liability and other key covers to protect your business and directors
It can be stressful and costly if your employees take legal action against your company or you as a director.
It’s often said that the UK is becoming a more litigious society, and there has been a large rise in employment tribunals, in part linked to the Covid pandemic.
So it’s essential that companies have adequate protection in place. At A-Plan we often find that businesses are unprepared for dealing with claims by employees, especially when they are made against individual directors.
Here are some of the main covers you should consider. As always, be sure to talk to a broker to find out what type of cover is most appropriate for you.
Employment Practices Liability
Employment Practices Liability Insurance, or EPL, protects your company against claims made by employees arising out of alleged wrongdoing related to their employment, such as discrimination, harassment, or unfair dismissal.
The policy covers the cost of defence, awards, settlements and legal representation.
An example EPL claim: in one example claim, an employee was sacked for turning up late for work on a number of occasions. They took the company to an Employment Tribunal, where they won their case for Unfair Dismissal. The company hadn’t followed its own disciplinary process and hadn’t given the employee sufficient opportunity to understand the seriousness of their situation.
Beware! Employment Practices Liability (EPL) insurance is different from Employers’ Liability (EL) insurance. EL insurance is compulsory in the UK, whereas EPL is optional.
Directors & Officers
Most EPL claims will be against a business. But what if a claim is made against an individual director? A company’s limited status offers some financial protection, but directors could face unlimited personal liability, up to their entire financial worth.
So, it’s essential directors are adequately protected as individuals. This is where Directors and Officers (D&O) Insurance comes in. It covers the cost of compensation where there are claims against them for acts including breach of duty, neglect, libel and slander. It covers legal costs, expenses and any civil damages awarded against the individual.
An example D&O claim: an employee brought an unfair dismissal claim, personally naming the director of the medium sized company involved. The director was required to attend an Employment Tribunal, where they had to engage their own legal counsel and fund their own defence. While the case against the director was dismissed, they still faced legal costs.
Corporate Legal Liability
Corporate legal liability insurance is similar to D&O insurance, but is cover to defend claims made against the company rather than individual directors.
So, this type of cover protects your company against the financial consequences of claims and prosecutions in situations such as a breach of trust or duty, neglect, infringement of copyright or intellectual property, breach of contract and more.
An example Corporate Legal Liability claim: the Environment Agency prosecuted a company for failing to conduct a survey for asbestos before starting an office refurbishment. In addition, the work had been carried out without an experienced contractor present to manage the site. The company was found guilty of exposing workers and its own employees to the potential risk of asbestos.
Speak to your broker
Not sure what type of cover is most appropriate to protect your business and directors? It’s always a good idea to speak to your broker, who can help you understand what insurance are right for you.
If you need advice in this area, then contact our specialist business branch on 0121 711 5466 and they will happily answer any questions you have.
