Do law firms need employment practices liability insurance?

Employment practices liability insurance is increasingly essential for law firms of all sizes. Despite the legal expertise within the firm, law firms are not immune to employment claims from their own staff. In fact, law firm employees may be more aware of their legal rights and more willing to pursue claims than employees in other industries. EPLI covers claims alleging wrongful termination, discrimination based on protected characteristics, sexual harassment, retaliation, failure to promote, wage and hour violations, and other employment-related wrongful acts.

These claims are excluded from both malpractice policies and commercial general liability policies, leaving a significant gap if EPLI is not in place. A single employment claim can cost $75,000 to $250,000 to defend, even if the claim is ultimately dismissed. Settlements and verdicts in employment cases can reach well into six figures, and class actions involving wage and hour violations can produce multi-million-dollar exposures.

Law firms face particular EPLI risks related to the up-or-out associate model, partnership decisions, lateral hiring practices, and the high-pressure work environment common in legal practice. Claims alleging that partnership denial was discriminatory, that work assignments were inequitable, or that the firm's culture tolerated harassment are all scenarios that EPLI addresses.

When purchasing EPLI, consider whether the policy covers claims by former employees, third-party harassment claims by clients or vendors, and wage and hour disputes. Some policies exclude wage and hour claims or offer them only as an optional endorsement. Choose a policy with defense costs outside of limits if available, as employment claims tend to be expensive to litigate. Many EPLI carriers also provide access to employment law hotlines and HR resources that can help you manage employee issues before they become claims.