When it comes to safeguarding a business, insurance is one of the most powerful tools available. Yet many employers are unclear about the differences between Employment Practices Liability Insurance (EPLI) and General Liability Insurance (GL). While both policies provide important protection, they address very different risks. Understanding how these coverages work—and how they complement each other—can make the difference between a manageable legal situation and a financial disaster.
Understanding the Core Purpose of General Liability Insurance
General Liability (GL) insurance is one of the most common forms of business coverage. It is designed to protect companies from claims made by third parties—customers, clients, visitors, or members of the public—who suffer harm as a result of the business’s activities.
The two primary categories of claims covered under a GL policy are:
Bodily Injury – If a customer slips and falls in a store, or is otherwise physically harmed due to a company’s operations, GL insurance can help cover medical expenses, legal defense, and potential settlements.
Property Damage – If a business causes damage to a client’s property—for example, a contractor accidentally breaking a client’s window—GL insurance steps in to cover repair or replacement costs.
This type of coverage is considered foundational, and many landlords, vendors, and clients require proof of GL insurance before doing business with a company.
Understanding the Core Purpose of EPLI Coverage
Employment Practices Liability Insurance (EPLI), by contrast, is specifically designed to protect businesses against claims brought by employees, former employees, or even job applicants. These claims focus not on physical harm or property damage, but on alleged violations of workplace rights.
Common issues covered under EPLI include:
Discrimination based on race, gender, age, religion, disability, or other protected categories.
Sexual harassment or hostile work environment allegations.
Wrongful termination, including claims of retaliation.
Failure to promote, or unfair hiring practices.
Invasion of privacy, defamation, or other personal grievances in the workplace.
Even a small allegation of unfair treatment can trigger a lawsuit that costs thousands of dollars in legal fees. EPLI helps businesses manage these risks by covering defense costs, settlements, and judgments.
Why General Liability Does Not Cover Employment Practices
A common misconception among business owners is that their General Liability policy will cover employment-related claims. Unfortunately, this is not the case.
GL policies are written to protect against third-party claims—not disputes between employers and their own workforce. If a business owner is sued by an employee for wrongful termination, harassment, or discrimination, their GL coverage will not respond. Without EPLI, the company would be left to pay legal expenses out of pocket.
This separation is deliberate, as employment practices claims carry unique risks that require specialized underwriting and policy language.
Key Differences Between EPLI and GL Insurance
While both EPLI and GL insurance are valuable, the key differences lie in who brings the claim and what type of harm is alleged:
Claimant:
GL: Third parties (customers, clients, visitors, or the general public).
EPLI: Employees, former employees, or job applicants.
Type of Claim:
GL: Bodily injury, property damage, personal injury to outsiders.
EPLI: Discrimination, harassment, wrongful termination, workplace rights violations.
Coverage Gaps:
GL does not cover internal workplace disputes.
EPLI does not cover physical injury or property damage to third parties.
Employers who rely on only one of these coverages leave themselves vulnerable to significant gaps in protection.
The Financial Impact of Workplace Claims
Employment-related lawsuits are increasingly common. According to data from the Equal Employment Opportunity Commission (EEOC), tens of thousands of workplace discrimination charges are filed annually in the United States. Even when a business prevails in court, the legal defense costs can easily exceed $100,000.
For small and mid-sized companies, such expenses can be crippling. EPLI coverage provides not only financial protection but also peace of mind, ensuring that employers can navigate these disputes without risking their company’s survival.
Real-World Scenarios That Highlight the Difference
To better understand the practical differences between EPLI and GL, consider the following examples:
General Liability Example: A customer visits a bakery and slips on a freshly mopped floor, breaking their wrist. The customer sues the business for medical costs and lost wages. The bakery’s GL insurance covers the claim.
EPLI Example: An employee at the same bakery alleges they were passed over for promotion due to age discrimination. They file a lawsuit seeking damages for lost income and emotional distress. This claim would only be covered by EPLI.
Both scenarios carry real financial consequences, but only the correct policy applies in each case.
Why Employers Need Both Types of Insurance
Given the distinct risks each policy addresses, many businesses benefit from carrying both General Liability and EPLI coverage. Together, they provide a broader safety net, ensuring that the company is shielded from claims arising from both external parties and internal employees.
In today’s litigious environment, where customers and employees alike are increasingly willing to pursue legal action, failing to carry adequate coverage can be a costly oversight.
How to Decide on the Right Coverage for Your Business
When evaluating insurance needs, employers should consider:
Industry Risk: Businesses with frequent customer interactions face higher GL exposure, while companies with larger workforces face greater EPLI risks.
Workplace Culture: Organizations with strong HR practices and compliance training may see fewer EPLI claims, but no company is immune.
Budget vs. Risk: While adding EPLI coverage does increase insurance costs, the potential expense of even a single lawsuit often far outweighs the premium.
Contractual Requirements: Many contracts mandate GL insurance, while some larger partners or investors may also require EPLI coverage.
Working with an experienced insurance broker can help employers tailor policies to their specific risk profile.
Building a Comprehensive Risk Management Strategy
EPLI and General Liability insurance serve distinct but equally important roles in protecting a business. GL provides a shield against claims from the outside world—customers, visitors, and clients while EPLI guards against disputes within the workforce. Together, they form a comprehensive foundation for risk management.
For employers, the decision is not a matter of choosing between the two, but of recognizing the different threats each addresses. By carrying both policies, companies can better safeguard their financial health, reputation, and long-term success.
