Property and Casualty Insurance Practice Exam

What is an important aspect of Employment Practices Liability Insurance?

1. It covers physical injuries on the job site

2. It protects against financial losses from wrongful employment actions

3. It guarantees employee retention

4. It provides health benefits for workers

The correct answer is: It protects against financial losses from wrongful employment actions

Employment Practices Liability Insurance (EPLI) is specifically designed to protect employers from financial losses that arise from claims made by employees regarding wrongful employment practices. This includes allegations of discrimination, wrongful termination, sexual harassment, and other employment-related issues. The insurance aids companies in managing the risks associated with these claims and can cover legal defense costs, settlements, and judgments. In contrast, the other options revolve around aspects that are not covered by EPLI. For example, covering physical injuries on the job site relates to Workers' Compensation Insurance, which focuses on injuries and occupational diseases. Guarantees of employee retention and provision of health benefits are management practices and employee benefits that fall outside the scope of any kind of liability insurance. Therefore, the focus on financial losses from wrongful employment actions accurately captures the primary function of Employment Practices Liability Insurance.