Businesses operating in New Jersey face significant operating costs, including not only rent, taxes, and wages, but also a variety of insurance coverages. In addition to the standard insurance coverages businesses are obligated to maintain such as workers compensation and general liability insurance, businesses also must consider whether to purchase Employment Practices Liability Insurance (“EPLI”). This decision is particularly important in New Jersey given the fact that the state has some of the most employee-friendly employment laws in the country such as the New Jersey Law Against Discrimination N.J.S.A. 10:5-1 et seq. (“NJLAD”). However, EPLI comes at a cost. Below are some of the factors that businesses must consider in determining whether or not to purchase EPLI.
Pros of Employment Practices Liability Insurance in New Jersey
- Financial Protection against High Defense Costs: Even in cases where the employer wins, the average cost to settle an employment claim pre-trial is significant, with prolonged courtroom battles costing significantly more.
- Coverage for a Wide Range of Claims: EPLI Policies typically cover legal fees, settlements, and judgments for allegations of:
- Wrongful termination, sexual harassment, and discrimination.
- Retaliation claims.
- Failure to hire or promote, and negligent evaluation.
- Access to Expert Legal Counsel: Many insurers offer "duty-to-defend" policies, giving small businesses access to top-tier law firms at discounted rates.
- Mitigation of 2026 Legal Developments: New Jersey employers in 2026 face new risks, including pay transparency mandates and liability for algorithmic discrimination in hiring, which EPLI can help manage.
- Third-Party Coverage: Some policies protect against claims if an employee is harassed by a customer or vendor, rather than a co-worker.
Cons & Challenges of Employment Practices Liability Insurance in New Jersey
- Higher Costs caused by Market Instability: New Jersey is classified as a "problematic" and "high-risk" jurisdiction by insurers. This leads to higher premiums and larger retentions (deductibles) compared to other states.
- Significant Exclusions: Most standard EPLI policies exclude:
- Wage and Hour Claims: Claims regarding unpaid overtime or misclassification often require a separate, difficult-to-obtain endorsement.
- Punitive Damages and Fines: Policies usually do not cover criminal fines, civil penalties, or punitive damages, which are sometimes available under New Jersey certain employment laws.
- Statutory Benefits: Workers' Compensation and Family Leave Act claims are typically excluded.
- "Claims-Made" Limitations: Coverage only applies to claims filed while the policy is active. If a policy lapses, any claim made afterward for an incident that occurred during the coverage period will not be covered.
- Eroding Policy Limits: Defense costs often deplete the total limit available to pay judgments, meaning a long legal battle could leave little money for an actual settlement.
If you operate a business in New Jersey and have employees, you may or may not need EPLI. If you are interested in discussing whether EPLI is appropriate for your company, please contact attorney Christopher Heyer at cheyer@scura.com or call (973) 696-8391.
