Not long ago, few insurance companies wrote employment practices liability insurance that included third-party coverage. When EPLI was introduced, the loss potential of third-party coverage was not fully understood, which made many insurers apprehensive. While most EPLI carriers now offer the coverage, a few still don't, mainly because there is not enough actuarial data to statistically support it.

Third-party EPLI is intended to protect an insured entity and its employees from allegations of various wrongful acts committed against the insured's customers, clients, vendors, suppliers and visitors. The list of potential claimants may even include medical patients, volunteers and all other non-employees. A few EPLI forms also grant coverage for wrongful acts committed by such third parties against the named insured's employees.

Third-party wrongful acts include harassment and all forms of discrimination. Discrimination claims may allege discriminatory practices against a person based on their race, religion, age, sex, national origin, disability, pregnancy or sexual orientation. Harassment claims allege unwelcome sexual advances or requests for sexual favors. Such acts include verbal and physical conduct, and other forms of harassment that create a hostile or offensive work environment. Some policies also respond to allegations of mental anguish, emotional distress and humiliation. Some go so far as to cover allegations of assault.