Cost of Employment Practices Liability Insurance

What would you do if an employee sued your business for wrongful termination or discrimination? Even if the claim is baseless, defending your company in court can cost thousands—sometimes more.

That’s where Employment Practices Liability Insurance (EPLI) comes in. It helps cover legal defense costs, settlements, and judgments related to employment-related claims.

The cost of EPLI depends on several factors, including business size, industry risk, claims history, HR policies, and location. Companies in high-risk industries like maritime, oil & gas, and construction often pay higher premiums due to greater exposure to workplace-related lawsuits.

In this guide, you'll learn:

• Typical EPLI costs for small, mid-sized, and large businesses
• Key factors influencing your premiums
• How to reduce costs without sacrificing protection
• Why customized EPLI coverage is crucial for high-risk industries

Let’s break it down.

‍What Influences EPLI Costs?

‍The cost of Employment Practices Liability Insurance (EPLI) isn't one-size-fits-all. Several factors determine your premium, and understanding them can help you manage costs while ensuring adequate protection.

‍1. Business Size and Employee Count

‍The more employees you have, the higher the risk of workplace disputes and claims. High employee turnover can also drive up premiums, as frequent hiring and firing increase the chances of claims.

‍Example: A small HVAC subcontractor with 10 employees typically pays far less for EPLI than a large oilfield service provider with 500+ employees. This is because the chances of layoffs and discrimination claims increase in case of a higher employee count. 

‍2. Industry Risk

‍Businesses in high-risk sectors, such as construction, oil & gas, and maritime, often face higher EPLI costs. Industries with demanding jobs and harsh work environments tend to have more employment-related disputes.

‍Example: A marine construction company with employees working in hazardous conditions may face more wrongful termination or discrimination claims than a small accounting firm. The former faces higher risk in this scenario.

‍3. Claims History

‍A history of past EPLI claims can significantly increase your premiums. Insurers assess previous lawsuits, settlements, and employee complaints to gauge risk.

‍Example: A Texas-based oil drilling company with multiple sexual harassment lawsuits in the past five years will face higher EPLI premiums. In contrast, a similar company of the same size with no claims history will get insurance for much less.

‍4. HR Policies and Compliance

‍Companies with strong HR policies and regular employee training may qualify for lower premiums. Implementing clear policies on hiring, firing, workplace conduct, and anti-harassment measures can also help reduce the risk of claims.

‍Example: A port operator in Houston that mandates annual anti-discrimination training may secure lower EPLI rates than a competitor with no structured HR policies.

‍5. Policy Limits and Deductibles

‍Higher policy limits provide more coverage but also come with higher premiums. Similarly, choosing a higher deductible can lower your upfront costs, but it means paying more out of pocket in case of a claim.

‍Example: A general contractor with a $1 million EPLI policy limit will pay higher premiums than a similar contractor opting for a $500,000 limit.

‍6. Geographic Location

‍EPLI costs vary by state, with California, New York, and Illinois having some of the highest rates due to strict labor laws. States with employee-friendly legal environments tend to have more claims, leading to higher insurance costs.

‍Example: A pipeline operator in Texas may pay less for EPLI than a similar company in California, where employee lawsuits are more frequent and settlements tend to be higher.

Not sure how your business’s risk factors affect EPLI costs? Contact TWFG Khan Insurance for a customized risk assessment.

With these factors in mind, how much does EPLI actually cost? While premiums vary, businesses can expect a general price range based on their size, industry, and risk exposure.

‍EPLI Cost Estimates: What Businesses Can Expect to Pay

‍The financial burden of employment-related lawsuits is significant. Between 2014 and 2024, the U.S. Department of Labor obtained over $260.8 million in monetary relief for employees and job seekers who faced workplace discrimination. Businesses without EPLI coverage may struggle to handle these costly settlements and legal fees.

EPLI premiums vary widely based on business size, industry, and location. While small businesses may pay as little as $1,500 annually, larger companies in high-risk sectors can see costs exceeding $100,000 annually.

Below is a breakdown of estimated EPLI costs based on business size and industry:

‍Average EPLI Costs by Business Size

‍EPLI costs are typically calculated based on employee count since the likelihood of employment-related claims increases with workforce size.

How Industry Type Affects EPLI Costs

‍Some industries face inherently higher employment-related risks due to workplace conditions, labor laws, and employee turnover rates.

Construction, Oil & Gas, and Maritime businesses face the highest EPLI costs due to:

• Frequent employee turnover.
• Higher incidence of discrimination and wrongful termination claims.
• Exposure to federal employment laws like the Jones Act and USL&H Insurance requirements.
• Large-scale layoffs due to project-based work structures.

To understand more about industry-specific risks, our post on Types of Construction Defects and Insurance Coverage provides valuable insights.

‍Geographic Variations in EPLI Costs

‍Certain states have higher EPLI premiums due to strict labor laws, high litigation rates, and employee-friendly regulations.

• Most Expensive States for EPLI (Higher Legal Exposure)
  
  • California – Strong employee protections, frequent lawsuits.
  • New York – High wages, strict anti-discrimination laws.
  • Illinois – Pro-employee labor laws, costly settlements.
• Less Expensive States for EPLI (Lower Litigation Risks)
  
  • Texas – Employer-friendly policies, fewer employment lawsuits.
  • Florida – Moderate risk, lower settlement amounts.
  • Georgia – Business-friendly labor environment.

How Claims History Impacts EPLI Costs

‍Insurers closely assess claims history when determining premiums.

Understanding the cost of EPLI is essential, but just as important is knowing what your policy covers. Let’s look at the most common claims businesses face and what EPLI can—and cannot—protect against.

‍Common EPLI Claims and Coverage Scope

‍Employment-related lawsuits can arise from a wide range of workplace issues. Legal defense costs alone can be substantial, even if a claim is unfounded. EPLI helps protect businesses from these financial risks.

‍Common Claims Covered by EPLIEPLI policies typically cover legal expenses, settlements, and judgments for claims related to:

• Wrongful Termination – When an employee claims they were fired illegally, such as due to discrimination or retaliation.
  
  • Example: A construction supervisor is laid off and alleges age discrimination, leading to a lawsuit against the company.
• Discrimination – Claims based on race, gender, age, disability, religion, or other protected categories.
  
  • Example: A marine engineering firm faces a lawsuit from a female employee alleging she was denied a promotion due to gender bias.
• Sexual Harassment – Claims of inappropriate conduct, hostile work environments, or failure to address harassment complaints.
  
  • Example: A deckhand in a shipping company files a lawsuit claiming ongoing workplace harassment that management failed to address.
• Retaliation – When an employee claims they were punished for reporting workplace misconduct or exercising legal rights.
  
  • Example: A welder in an oil refinery reports a safety violation and is later demoted, leading to a retaliation lawsuit.
• Failure to Hire or Promote – Allegations that hiring or promotion decisions were based on unlawful factors.
  
  • Example: A pipeline operator is sued by a job applicant who claims they were denied a position due to their disability.
• Breach of Employment Contract – When an employer allegedly violates the terms of an employment agreement.
  
  • Example: A project manager claims their contract guaranteed two years of employment, but they were terminated after six months.

What EPLI Does Not Cover

‍While EPLI provides critical protection, there are exclusions that you should be aware of:

Why Understanding EPLI Coverage Matters

• Misinterpreting EPLI coverage can lead to unexpected financial gaps.
• Some businesses assume all workplace-related lawsuits are covered, but exclusions like wage disputes and bodily injuries require separate policies.
• High-risk industries, especially maritime, oil & gas, and construction should work with specialized brokers to ensure their policy covers industry-specific risks.

Is your business protected against the most common employment-related claims? Ensure you have the right EPLI coverage with TWFG Khan Insurance.

Explore our post on Different Types of Insurance Needed for Business for more insights into various insurance types and their importance.

While EPLI provides broad protection, businesses in high-risk industries often require customized coverage. Standard policies may leave critical gaps, making tailored EPLI essential for industries like maritime, oil & gas, and construction.

‍Importance of Tailored EPLI Coverage for High-Risk Industries

‍Standard EPLI policies may provide general protection, but businesses in high-risk industries need tailored coverage to address their unique employment-related exposures. 

‍Why Standard EPLI Coverage May Not Be Enough

‍Unlike office-based businesses, industries with hazardous job conditions and subcontractor-heavy employment models require specialized EPLI coverage.

• High Turnover & Temporary Workforce: Construction and oilfield jobs often rely on seasonal, contract-based, or temporary workers, increasing the risk of disputes over layoffs and terminations.
• Strict Federal and State Labor Laws: The Jones Act, USL&H (U.S. Longshore and Harbor Workers’ Compensation Act), and OSHA regulations lead to more employment-related legal challenges.
• Workplace Risks: In male-dominated industries like construction, offshore drilling, and shipbuilding, sexual harassment and discrimination claims are more prevalent.
• Mass Layoffs and Workforce Restructuring: The cyclical nature of oil & gas drilling, maritime logistics, and infrastructure projects means businesses frequently scale up and down. It leads to higher exposure to wrongful termination claims.

For instance, wage and hour disputes are also a major business concern. In fiscal year 2024, the U.S. Department of Labor recovered over $273 million in back wages due to wage violations. While EPLI does not cover unpaid wages, some policies include defense coverage for wage-related claims, reducing legal costs.

‍Work with an Experienced Broker to Get the Best Policy

‍Independent brokers like TWFG Khan Insurance provide access to multiple insurance carriers, helping you secure customized EPLI coverage at the most competitive rates. Our expertise ensures your policy aligns with your industry’s specific risks and budget.

With the right coverage in place, you must also consider how to manage costs effectively. Fortunately, there are several strategies to lower EPLI premiums without sacrificing protection.

‍How to Lower EPLI Costs Without Compromising Protection

‍By taking a proactive approach to risk management and policy structuring, you can lower your premiums while maintaining robust protection.

• Strengthen HR Policies and Compliance: Implement clear workplace policies, regular compliance training, and structured procedures for handling employee grievances. Strong HR practices reduce the likelihood of claims and may qualify your business for lower EPLI premiums.

• Maintain a Clean Claims History: Resolving disputes internally through mediation, proper documentation, and early intervention can help prevent claims from escalating into costly legal battles.

• Choose Higher Deductibles to Reduce Premiums: Opting for a higher deductible lowers your monthly or annual EPLI premium. While this increases out-of-pocket costs in case of a claim, businesses with strong risk management policies can benefit from substantial premium reductions.

• Bundle EPLI with Other Business Policies: Many insurers offer discounts when EPLI is bundled with other policies, such as General Liability, Directors & Officers (D&O) Insurance, or Workers’ Compensation. Bundling not only reduces costs but also ensures comprehensive business protection.

If you liked this blog, you can also read our other blog on this topic Understanding Employment Practices Liability Insurance (EPLI)

‍Finding the right EPLI policy at the best price requires expertise, and that’s where TWFG Khan Insurance comes in.

‍How TWFG Khan Insurance Can Help

‍Employment-related lawsuits can be costly, but the right EPLI coverage protects your business from financial risk. TWFG Khan Insurance specializes in tailored EPLI solutions for high-risk industries like maritime, oil & gas, and construction, ensuring you get the right coverage without overpaying.

• Industry-Specific EPLI Policies – Coverage tailored to high-risk industries, protecting against wrongful termination, discrimination, and workplace disputes.
• Access to Top-Rated Carriers – Competitive rates from leading insurers, ensuring comprehensive protection without unnecessary costs.
• Custom Risk Assessments – We analyze your claims history and workforce risks to help lower premiums and align coverage with industry regulations.
• Claims Support & Expert Guidance – 24/7 assistance to navigate claims efficiently and minimize financial impact.

Get a quote with us today and secure EPLI coverage that protects your business while keeping costs under control.