What happens to the defense expenses in an EPLI policy?

In an Employment Practices Liability Insurance (EPLI) policy, defense expenses typically count against the coverage limits. This means that the expenses incurred to defend the insured against employment-related claims will reduce the total amount available for settlements or judgments. EPLI policies are designed to protect employers from various claims such as wrongful termination, discrimination, and harassment, but it is important for policyholders to be aware that the costs of legal defense will be deducted from their overall policy limits.

This aspect of EPLI is crucial for businesses to consider when assessing their risk management strategies. It emphasizes the need for adequate liability limits because if a company faces significant legal defense costs, these can quickly exhaust the available policy limits, leaving little to no coverage for awards or settlements in successful claims. Hence, understanding how defense expenses impact coverage limits is essential for effective financial planning and risk mitigation in employment practices scenarios.