Should You Have EPLI or General Liability Insurance?

You discover that one of your employees has filed a discrimination lawsuit. At the same time, a customer injures themselves by slipping on a freshly mopped floor in your store. Although you may assume one insurance policy covers it all, that’s not always the case. While general liability insurance can protect you against certain third-party incidents, it generally won’t help if the complaint is from an employee claiming harassment, discrimination, or wrongful termination. EPLI (Employment Practices Liability Insurance) is the solution you need. This blog will break down how these two policies work, which risks they each cover, and why you may need both for well-rounded protection.

Why Liability Insurance Matters

Running a business means you accept a certain level of risk. At any time, you could face lawsuits from customers—like a personal injury claim—or from employees who believe they’ve been mistreated at work. If you lack proper insurance, the financial blow from legal fees, court judgments, or settlements can be devastating. Some owners assume a single policy will address every potential lawsuit, only to discover coverage gaps when it’s too late.

General liability plays a crucial role by covering many issues that arise outside your organization, but it usually excludes workplace disputes stemming from alleged misconduct involving hiring, firing, or promotions. With employment-related lawsuits on the rise, a separate EPLI policy is often necessary to shield you from those internal risks.

Explaining General Liability Insurance

General liability insurance is typically your first line of defense against accidents and injuries that befall non-employees on your property or result from your business activities. It often covers medical bills when a customer is hurt in your store and may also protect you if you accidentally damage someone else’s property. Certain policies even address personal and advertising injury—cases that involve defamation or advertising mishaps.

What general liability does not cover are issues triggered by your own workforce. If an employee files a discrimination complaint, experiences harassment, or alleges wrongful termination, general liability likely won’t help. Despite its wide scope for external claims, this policy focuses on third parties rather than the people on your payroll.

The Purpose of EPLI

Unlike general liability, EPLI was designed to handle claims brought by employees (or would-be employees) in connection with how your company manages its workforce. If someone alleges harassment, wrongful termination, or a hostile work environment, EPLI can fund legal defense, settlements, and certain court verdicts that arise from these disputes.

Think of EPLI as a safeguard for your internal operations. Even well-intentioned employers can face lawsuits if there’s a single misunderstanding or a manager makes an unwise decision that the employee perceives as discriminatory. In our increasingly litigious environment, many businesses consider EPLI just as essential as general liability.

Why You Might Need Both

Although general liability and EPLI both include the term “liability,” they tackle different sides of your business. General liability manages claims from non-employees who are physically harmed, have their property damaged, or feel wronged by your marketing. EPLI, on the other hand, deals with disputes arising from your own staff. Having both means you don’t have to wonder who’s suing you—or why—before figuring out whether you’re insured. The coverage you need is already in place.

Common Misconceptions About General Liability

Many business owners assume that general liability insurance is a catch-all solution for legal claims. They believe that as long as they have this coverage, their business is protected against most lawsuits. However, general liability primarily covers third-party claims—those from customers, vendors, or members of the public—not disputes with employees. This misunderstanding can leave businesses dangerously exposed.

Here are a few of the most common misconceptions:

“I don’t need EPLI if I have few employees.”

Some business owners think that small teams are immune to employment-related claims. However, even companies with just a handful of employees can face lawsuits over discrimination, wrongful termination, or harassment. In fact, small businesses are often more vulnerable because they typically lack dedicated HR departments to enforce workplace policies and documentation. A single lawsuit—whether founded or frivolous—can drain a small business’s resources and, in extreme cases, force closure.

“We’re a close-knit group, so no one would sue.”

Many employers assume that a family-like atmosphere or long-term relationships with employees mean they won’t face legal action. Unfortunately, this sense of trust doesn’t always prevent disputes. Changes in management, enforcement of new policies, or even miscommunication can lead to unexpected legal claims. Employees may feel slighted or believe their rights have been violated, regardless of the original intent. Even in friendly workplaces, disagreements can escalate into costly lawsuits.

“My employees love me; we have an open-door policy.”

A welcoming and communicative work environment is great for morale, but it doesn’t eliminate risk. Employees who feel comfortable voicing concerns internally might still file lawsuits if they believe their complaints aren’t adequately addressed. Perception plays a huge role in workplace disputes, and what one employee sees as a minor oversight, another may view as discrimination or unfair treatment. All it takes is one perceived slight, one denied promotion, or one disciplinary action for an employee to pursue legal action—whether or not their claim has merit.

The Bottom Line:

Good intentions, strong workplace culture, and open communication help reduce risk, but they don’t eliminate it. General liability insurance is not designed to protect against employee lawsuits. That’s why businesses of all sizes should consider EPLI—to cover the specific risks that arise in managing and maintaining a workforce.

Worried your current setup might leave your business at risk? Reach out to McGhee for a thorough review. We’ll help you figure out whether EPLI or expanded general liability coverage—or both—are the right moves for your specific needs.

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Coverage Costs and Other Considerations

Both general liability and EPLI can be surprisingly affordable, especially when you consider the legal expenses they help you avoid. Premiums depend on your industry, company size, prior claims, and the policy limits you choose. A small business with a handful of employees will typically pay less than a larger firm with high turnover.

If cost is a concern, you might consider bundling your insurance through a single carrier. Some insurers offer discounts when combining general liability, property coverage, and EPLI under a Business Owner’s Policy (BOP). While not every company qualifies for this type of packaging, those that do often find it a convenient, cost-saving option.

Coverage Costs and Policy Considerations

Both general liability and EPLI premiums depend on factors like:

  • Industry and Risk Profile: Companies with higher employee turnover or frequent public interaction (like hospitality) may face higher premiums for both general liability and EPLI.
  • Policy Limits: Both types of coverage let you choose limits (e.g., $1 million per claim, $2 million aggregate) based on your risk tolerance and budget. It’s vital to ensure these limits match realistic potential exposure.
  • Claims History: Insurers might raise premiums if you’ve dealt with multiple claims in the past—whether they’re customer-injury claims or employee complaints.
  • Deductibles and Retentions: Much like other insurance, you’ll need to decide on a deductible for each policy. A higher deductible might reduce your premium but increase your out-of-pocket risk during a claim.

The best approach is a balanced one: weigh your business’s daily operations, workforce size, and overall liabilities to determine the ideal level of coverage for both general liability and EPLI.

Proactive Risk Management

While insurance acts as a financial safety net, you can reduce your likelihood of needing to file claims by adopting robust risk management strategies:

  • Employee Handbook and Policies: A clear code of conduct, anti-harassment guidelines, and detailed disciplinary procedures show you’re committed to fair treatment.
  • Regular Training: Conduct workshops or online courses on discrimination, harassment, and company policies. This keeps employees informed and fosters a respectful culture.
  • Document Everything: From interviews to performance reviews, maintain records that can substantiate your actions if a dispute arises.
  • Promptly Address Complaints: Whether from customers or employees, quick, thorough investigations demonstrate your commitment to solving problems fairly.

Secure Your Business With McGhee Insurance Agency

Looking for guidance on how to align your coverage with your actual risks? We have you covered:

  • Customized Policy Reviews: We’ll examine your existing general liability and EPLI policies—or help you initiate coverage from scratch—to ensure you have the right limits and endorsements.
  • Risk Management Support: From employee handbooks to claims handling, we offer resources that reduce your chances of ending up in court.
  • Dedicated, Ongoing Service: As your business grows, so do your risks. We’re here to review and adjust your coverage whenever you need.

Don’t let the differences between general liability and EPLI catch you off guard. Reach out and learn how we can help you close coverage gaps, manage costs, and protect your business from unforeseen legal troubles—so you can focus on growth instead of lawsuits.

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